Research

Publications

Innovation, Firm Size Distribution, and Gains from Trade, with Wen-Tai Hsu and Shin-Kun Peng, Theoretical Economics, 18, Jan. 2023, 341-380, DOI: https://doi.org/10.3982/TE4152. Earlier version. Online appendix.

The Market Structures in Trade Intermediation with Heterogeneous Manufacturing Firms, with Shin-Kun Peng and Tsung-Sheng Tsai, International Review of Economics and Finance, 75, Sep. 2021, 501-523, DOI: https://doi.org/10.1016/j.iref.2021.04.013.

Learning by Supplying and Competition Threat, with Alireza Naghavi and Shin-Kun Peng, Review of World Economics, 157, Feb. 2021, 121-148, DOI: https://doi.org/10.1007/s10290-020-00386-y.

How Expert are Experts? A Model for Expertise Cultivation, with Tsung-Sheng Tsai, Academia Economic Papers, 44, Sep. 2016, 295-331. Full text available here.

Working Papers

Social Network and Industrial Policy: Japan's Camphor Monopoly in Colonial Taiwan, with Shao-Yu Jheng. Full text available here. Slides for older versions: long version and short version. 

Abstract This paper examines how firm-official connectivity affects policy treatments and outcomes of industrial policies by combining micro-level data from Japan's Camphor Monopoly System in Taiwan with a industrialist-official network compiled from a newspaper archive. Using a recentered shift-share design, our reduced-form estimation finds that tighter firm-official connections lead to more favorable treatments but suggests little effects on productivity. We simulate a quantitative model based on the institutional design, finding that both excessively strong or weak connections hinder productivity improvements of firms, and that the authority's decision exhibits a mixture between favoring connected conglomerates and picking smaller but efficient firms.

Industrial and Productivity Dynamics in Crude Camphor Industry of Japanese-Ruled Taiwan (1902–18), with Shao-Yu Jheng. Full text available here. Preliminary slide available here. Slide for TEA 2024.

Abstract This study examines the dynamics of policy treatments and firm productivity of the crude camphor sector under Japan's Camphor Monopoly System in Taiwan. We document how Japanese firms gradually entered the industry, securing more production quotas and sites, eventually coming to dominate the sector. Our findings suggest that the rise of Japanese firms is linked to the global economic crisis of 1907–08, during which less productive firms, mainly local producers, were shut down by the authorities. However, this selection process was not neutral with respect to firm ownership, as the surviving local producers were more productive than most of the surviving Japanese firms but consistently received less favorable policy benefits. This finding aligns with Chen and Jheng (2024), who show that the monopoly system selected efficient firms while also exhibiting favoritism toward certain Japanese producers.

Individual Labor Supply, Worker Skills, and Gains from Trade, with Pao-Li Chang and Wen-Tai Hsu. Full text available here.

Abstract This paper studies how trade may influence individual labor supply, and in turn, its implications on gains from trade. We first propose a simple labor-supply module capturing individuals’ decision making between working and home production. An individual consumes both a home good (made by home production) and a market good, which is a composite of differentiated goods. Individual workers differ in their skills and hence income. The module predicts that real wages are a sufficient statistic for how individuals respond to aggregate economic conditions. Trade liberalization, in the cases where it increases real wages, increases (decreases) individual labor supply when the market and home goods are substitutes (complements), and the effect magnitudes are smaller (larger) for more skilled workers. The model predictions are tested using Taiwanese individual-level data on labor market outcomes. The empirical evidence supports the model predictions for the case where the home and market goods are substitutes. Our quantitative analysis suggests that the welfare gains from trade are 62% of what would be obtained in an ACR-class model where individuals fully supply their labor. This highlights a strong moderating effect due to the endogenous labor-supply mechanism.

Labor Market Implications of Taiwan's Accession to the WTO: A Dynamic Quantitative Analysis, with Pao-Li Chang, Wen-Tai Hsu, and Xin Yi. Full text available here. Online appendix. Presentation Slide (short). Presentation Slide (long).

Abstract This paper studies the effects of Taiwan’s accession to the WTO in 2002 on the labor market dynamics in Taiwan during 1995–2020. Our dynamic quantitative framework builds on that of Caliendo, Dvorkin and Parro (2019) but allows for differently skilled labor inputs (low, middle, high) and sector-skill dynamic choice by workers. We map the model to the labor-market transition data in Taiwan, the country-sector-specific skill shares in production, and the bilateral trade flows and import tariffs, of 61 economies and 22 sectors for the period 1995–2007. We study the counterfactual dynamics if the bilateral tariffs related to Taiwan’s imports and exports are rolled back to their 1995 levels, and calculate the cumulative effects on the employment shares and welfare of workers by sector and skill level. We find that the tariff reductions during this period help explain the phenomenal expansion of certain star sectors in Taiwan and the growing share of high-skilled workers in Taiwan’s labor composition. Bilateral tariff concessions between China and Taiwan account for the bulk of the effects of Taiwan’s WTO accession, illustrating the importance of China to Taiwan in the latter’s trade structure. The skill-upgrade mechanism is critical in explaining the large employment effects of its WTO accession.

Cap-and-Trade System, Firm Selection, and Emission Intensity, R&R at Energy Economics, full text available here. Slide for an earlier version available here.

Abstract We investigate the implications of a cap-and-trade system on industrial productivity and emission intensity in an environment where firms exhibit heterogeneity in their productivities. Our analysis reveals that a cap-and-trade system with free firm-level allowances leads to a more lenient firm selection compared to an unregulated economy. This leniency arises because free allowances act as subsidies, and the aggregate emission cap reallocates workers from the materials sector to the manufacturing sector beyond the scale under the competitive equilibrium. The effects respectively reduce barriers for firms to remain operative as well as production efficiency in the manufacturing sector, thereby prompting unproductive firms to stay operative. This lenient firm selection can outweigh improvements in firm-level emission per unit of output, resulting in higher emission intensity at the economic level compared to situations where environmental regulations are absent. We inspect the impact of the phasing out of free allowances using the EU Emission Trading System as an illustrative example. By calibrating the model in accordance to the EU ETS, our simulations demonstrate that the phasing out of free allowances partially mitigates the effects of lenient firm selection, leading to a substantial improvement in emission intensity.

Work in Progress

Growing with Product and Process Innovations, with Wen-Tai Hsu, Shin-Kun Peng, and Ping Wang

Increasing Markup, Declining Labor Share, and Oligopolistic General Equilibrium, with Wen-Tai Hsu