Working Papers
Trade and Labor
[1] Skill-Biased Imports, Human Capital Accumulation, and the Allocation of Talent, with Jingting Fan
[CRC TR 224 Discussion Paper]
- Young Economist Award, FIW International Economics conference 2021
- R&R, Journal of International Economics
Imported capital goods, which embody skill-complementary technologies, can increase the supply of skill in developing countries like China. By exploiting the cross-prefecture variation in imported capital goods, I show that the surge in imported capital goods encourages human capital accumulation and migration in China. There are three main findings. First, from 2000 through 2010 the import of capital goods leads to a 20% increase in college share for a prefecture at the 75th percentile of the import growth distribution over one at the 25th percentile. Second, I quantify the importance of the three channels, namely, skill acquisition, immigration of skilled workers, and emigration of skilled workers. The skill acquisition channel is the most important. Third, I trace the responses of skill supply to demand shift. I find that imported capital goods increase college wage premium and that the effect attenuates over time with the increase in skill supply.
Trade Policy, Market Strucuture, and Economic Incidence
[1] Who Pays for the Tariffs？A Tale of Two Countries, with Chaonan Feng and Liyan Han
In this paper, we study the division of tariff burden between importers and exporters during the US-China trade war and investigate why the average tariff pass-through rates are different in China and the United States. While the US punitive tariffs were almost entirely borne by US importers, only 60%-80% of China's retaliatory tariffs were passed to Chinese importers. The US-China differences in average tariff pass-through rates are mainly driven by their different import structures. China mostly imported products with lower tariff pass-through rates, such as aircraft, integrated circuits, motor vehicles, and agricultural products. In contrast, the US mainly imported products with higher tariff pass-through rates, such as apparel, toys, and electronic products. The different pass-through rates across products can be explained by product market competition. We find a U-shaped relationship between market share and tariff pass-through rate. In a perfectly competitive market or a monopolistic market, tariff burdens are almost entirely borne by importers. In an oligopolistic market, tariff burdens are shared between exporters and importers.
[2] Trade War, Core Input, and Firm Value, with Huiyi Liao, Liyan Han, and Libo Yin
We study the asset pricing implications of a firm's participation in the global supply chain. We develop a model to show that a firm's global sourcing strategy maintains an option to hedge its value against trade policy shocks. Higher output tariffs increase firm value through reduced import competition, whereas higher input tariffs decrease firm value through higher input costs. We test this model in the context of the US-China trade war and quantify the impact of trade protectionism on Chinese firm values.
One standard deviation increase of input tariff reduces the stock return by 6.3 percent for firms that import their inputs, more than offsetting the gains from raising output tariffs. The negative effect of input tariffs is more substantial for firms relying more on foreign intermediate inputs. The welfare loss of the Chinese retaliatory tariffs was as much as $45.6 billion, 1.8% of China's total market capitalization.
[3] Who Pays for the Emission Fee？with Ying Li, Zhi Su, and Libo Yin
We study the economic incidence of SO2 emission fees in China. By considering input-output linkages, we derive statistically sufficient representations for the incidence and show that the emission fees play a dual role. On the one hand, manufacturing producers pay 35 percent of the fees charged for their emissions. On the other hand, the emission fees imposed on upstream suppliers translate into higher input costs faced by manufacturing producers with a pass-through rate of 34 percent. 48 percent of the welfare cost of input emission fees is borne by producers. Apart from the input-output linkages, we also study the inter-region spillover effect. We find that local buyers pay 59 percent of the emission fee charged by the local governments, while local buyers pay 80 percent of the emission fee charged by other regions.
Trade, Firm Location, and Agglomeration
[1] Export-Induced Spatial Concentration, with Jonas Casper
We empirically examine the role of international trade in shaping the widening regional disparities in economic development. Initially larger cities should benefit more from trade openness because productive exporters are disproportionately located there (Gaubert, 2018). By exploiting a unique dataset which contains the geo-locations of Chinese firms, we find a widening spatial divergence of economic activity concentration in response to trade openess, both across cities and within cities. These effects are not exclusive to industries directly exposed to trade openness, but also spill over locally to related industries.
[2] Clustering as a Shield: Mitigating the Negative Effects of the Trade War, with Chaonan Feng, Liyan Han, and Jinfeng Luo
We analyze the effect of industry clusters on regional economic resilience in China during the US-China trade war. We exploit regional variations stemming from the interaction between industry clustering, namely the geographic concentration of firms in similar industries, and trade exposures arising from initial differences in export specialization across products. For a one percentage point increase in export tariffs, a prefecture at the 25th percentile of the cluster index distribution experienced 3.4 percentage points, that is 21.5 percent, more reduction in night light intensities than a prefecture at the 75th percentile. We hypothesize that industry clusters can mitigate the negative impacts of U.S. tariffs because firms located in clustering regions can adjust production at lower costs for using similar inputs. We corroborate the hypothesis by showing that regions, where firms have closer input-output linkages and similar workforce structures, have higher cluster indexes and higher degrees of resilience to tariff increases. Our study sheds light on the sources of differential regional responses to global trade disruptions.
[3] Trade Policy and the Geography of Global Production, with Harald Fadinger and Jan Schymik
We assess how trade policy affects the geography of global production within global value chains (GVCs) using plant-level information on sales and employment for 50 countries from Worldbase, 4-digit SIC product-level import and tariff data for the years 1993 to 2018 and information from detailed US input-output tables. We find that (i) product-level imports respond more sensitively to tariffs in industries that are closer to final demand (more downstream); (ii) manufacturing activity is negatively impacted by input tariffs, in particular in more downstream industries; (iii) because GVCs lead to interdependencies in location decisions of various production stages, there are important third-country effects of input tariffs on local manufacturing activities; (iv) at the level of multinational firms, higher tariffs charged on imports from any given location reduce the number and sales of their local affiliates, and these effects are larger in more downstream sectors.
Selected Work in Progress
Trade, Enviroment, and Health
[1] Trade-induced Deforestation and Political Changes, with Ricardo Dahis
[2] Importing Pollution? the Health Consequences of Garbage Imports, with Liyan Han and Li Wan
Publications
[1] China's Skill-Biased Imports, China Economic Review, 2022, vol. 74, with Hongbin Li and Hong Ma
[IZA Discussion Paper]
[2] Understanding Regional Export Growth in China, World Trade Evolution: Growth, Productivity and Employment, 2018, Routledge, L.Y.Ing and M.Yu (ed). pages 195-228. with David Autor, David Dorn, and Gordon Hanson
[3] Exogenous Shocks and the Spillover Effects between Uncertainty and Oil Price, Energy Economics, 2016, vol. 54, pages 224-234, with Liyan Han, Libo Yin, and Yimin Zhou
[4] Do Foreign Institutional Investors Stabilize the Capital Market? Economics Letters, 2015, vol. 136, pages 73-75, with Liyan Han, Libo Yin, and Qingqing Zheng
[5] The End of Cheap Chinese Labor, Journal of Economic Perspectives, 2012, vol. 26(4), pages 57-74, with Hongbin Li, Binzhen Wu, and Yanyan Xiong
Publications (in Chinese, pre Ph.D.)
[1] Family structure and Puzzle of U-shaped Age Saving Profile, Economic Research Journal (经济研究) , 2014, with Binzhen Wu
[2] Value Investing or Value Creating? A Comparative Study between Foreign and Domestic Institutional Investors, China Economic Quarterly (经济学季刊), 2013, with Liyan Han
[3] Migration Cost and Labor Shortage, Chinese Social Sciences Today (中国社会科学报), 2011, with Hongbin Li
[4] Model Improvements and Empirical Research for Prediction of Small and Medium-Sized Companies in the Stock Market, Journal of Quantitative and Technical Economics (数量经济技术经济研究), 2010, with Liyan Han
Trade and Labor
[1] Skill-Biased Imports, Human Capital Accumulation, and the Allocation of Talent, with Jingting Fan
[CRC TR 224 Discussion Paper]
- Young Economist Award, FIW International Economics conference 2021
- R&R, Journal of International Economics
Imported capital goods, which embody skill-complementary technologies, can increase the supply of skill in developing countries like China. By exploiting the cross-prefecture variation in imported capital goods, I show that the surge in imported capital goods encourages human capital accumulation and migration in China. There are three main findings. First, from 2000 through 2010 the import of capital goods leads to a 20% increase in college share for a prefecture at the 75th percentile of the import growth distribution over one at the 25th percentile. Second, I quantify the importance of the three channels, namely, skill acquisition, immigration of skilled workers, and emigration of skilled workers. The skill acquisition channel is the most important. Third, I trace the responses of skill supply to demand shift. I find that imported capital goods increase college wage premium and that the effect attenuates over time with the increase in skill supply.
Trade Policy, Market Strucuture, and Economic Incidence
[1] Who Pays for the Tariffs？A Tale of Two Countries, with Chaonan Feng and Liyan Han
In this paper, we study the division of tariff burden between importers and exporters during the US-China trade war and investigate why the average tariff pass-through rates are different in China and the United States. While the US punitive tariffs were almost entirely borne by US importers, only 60%-80% of China's retaliatory tariffs were passed to Chinese importers. The US-China differences in average tariff pass-through rates are mainly driven by their different import structures. China mostly imported products with lower tariff pass-through rates, such as aircraft, integrated circuits, motor vehicles, and agricultural products. In contrast, the US mainly imported products with higher tariff pass-through rates, such as apparel, toys, and electronic products. The different pass-through rates across products can be explained by product market competition. We find a U-shaped relationship between market share and tariff pass-through rate. In a perfectly competitive market or a monopolistic market, tariff burdens are almost entirely borne by importers. In an oligopolistic market, tariff burdens are shared between exporters and importers.
[2] Trade War, Core Input, and Firm Value, with Huiyi Liao, Liyan Han, and Libo Yin
We study the asset pricing implications of a firm's participation in the global supply chain. We develop a model to show that a firm's global sourcing strategy maintains an option to hedge its value against trade policy shocks. Higher output tariffs increase firm value through reduced import competition, whereas higher input tariffs decrease firm value through higher input costs. We test this model in the context of the US-China trade war and quantify the impact of trade protectionism on Chinese firm values.
One standard deviation increase of input tariff reduces the stock return by 6.3 percent for firms that import their inputs, more than offsetting the gains from raising output tariffs. The negative effect of input tariffs is more substantial for firms relying more on foreign intermediate inputs. The welfare loss of the Chinese retaliatory tariffs was as much as $45.6 billion, 1.8% of China's total market capitalization.
[3] Who Pays for the Emission Fee？with Ying Li, Zhi Su, and Libo Yin
We study the economic incidence of SO2 emission fees in China. By considering input-output linkages, we derive statistically sufficient representations for the incidence and show that the emission fees play a dual role. On the one hand, manufacturing producers pay 35 percent of the fees charged for their emissions. On the other hand, the emission fees imposed on upstream suppliers translate into higher input costs faced by manufacturing producers with a pass-through rate of 34 percent. 48 percent of the welfare cost of input emission fees is borne by producers. Apart from the input-output linkages, we also study the inter-region spillover effect. We find that local buyers pay 59 percent of the emission fee charged by the local governments, while local buyers pay 80 percent of the emission fee charged by other regions.
Trade, Firm Location, and Agglomeration
[1] Export-Induced Spatial Concentration, with Jonas Casper
We empirically examine the role of international trade in shaping the widening regional disparities in economic development. Initially larger cities should benefit more from trade openness because productive exporters are disproportionately located there (Gaubert, 2018). By exploiting a unique dataset which contains the geo-locations of Chinese firms, we find a widening spatial divergence of economic activity concentration in response to trade openess, both across cities and within cities. These effects are not exclusive to industries directly exposed to trade openness, but also spill over locally to related industries.
[2] Clustering as a Shield: Mitigating the Negative Effects of the Trade War, with Chaonan Feng, Liyan Han, and Jinfeng Luo
We analyze the effect of industry clusters on regional economic resilience in China during the US-China trade war. We exploit regional variations stemming from the interaction between industry clustering, namely the geographic concentration of firms in similar industries, and trade exposures arising from initial differences in export specialization across products. For a one percentage point increase in export tariffs, a prefecture at the 25th percentile of the cluster index distribution experienced 3.4 percentage points, that is 21.5 percent, more reduction in night light intensities than a prefecture at the 75th percentile. We hypothesize that industry clusters can mitigate the negative impacts of U.S. tariffs because firms located in clustering regions can adjust production at lower costs for using similar inputs. We corroborate the hypothesis by showing that regions, where firms have closer input-output linkages and similar workforce structures, have higher cluster indexes and higher degrees of resilience to tariff increases. Our study sheds light on the sources of differential regional responses to global trade disruptions.
[3] Trade Policy and the Geography of Global Production, with Harald Fadinger and Jan Schymik
We assess how trade policy affects the geography of global production within global value chains (GVCs) using plant-level information on sales and employment for 50 countries from Worldbase, 4-digit SIC product-level import and tariff data for the years 1993 to 2018 and information from detailed US input-output tables. We find that (i) product-level imports respond more sensitively to tariffs in industries that are closer to final demand (more downstream); (ii) manufacturing activity is negatively impacted by input tariffs, in particular in more downstream industries; (iii) because GVCs lead to interdependencies in location decisions of various production stages, there are important third-country effects of input tariffs on local manufacturing activities; (iv) at the level of multinational firms, higher tariffs charged on imports from any given location reduce the number and sales of their local affiliates, and these effects are larger in more downstream sectors.
Selected Work in Progress
Trade, Enviroment, and Health
[1] Trade-induced Deforestation and Political Changes, with Ricardo Dahis
[2] Importing Pollution? the Health Consequences of Garbage Imports, with Liyan Han and Li Wan
Publications
[1] China's Skill-Biased Imports, China Economic Review, 2022, vol. 74, with Hongbin Li and Hong Ma
[IZA Discussion Paper]
[2] Understanding Regional Export Growth in China, World Trade Evolution: Growth, Productivity and Employment, 2018, Routledge, L.Y.Ing and M.Yu (ed). pages 195-228. with David Autor, David Dorn, and Gordon Hanson
[3] Exogenous Shocks and the Spillover Effects between Uncertainty and Oil Price, Energy Economics, 2016, vol. 54, pages 224-234, with Liyan Han, Libo Yin, and Yimin Zhou
[4] Do Foreign Institutional Investors Stabilize the Capital Market? Economics Letters, 2015, vol. 136, pages 73-75, with Liyan Han, Libo Yin, and Qingqing Zheng
[5] The End of Cheap Chinese Labor, Journal of Economic Perspectives, 2012, vol. 26(4), pages 57-74, with Hongbin Li, Binzhen Wu, and Yanyan Xiong
Publications (in Chinese, pre Ph.D.)
[1] Family structure and Puzzle of U-shaped Age Saving Profile, Economic Research Journal (经济研究) , 2014, with Binzhen Wu
[2] Value Investing or Value Creating? A Comparative Study between Foreign and Domestic Institutional Investors, China Economic Quarterly (经济学季刊), 2013, with Liyan Han
[3] Migration Cost and Labor Shortage, Chinese Social Sciences Today (中国社会科学报), 2011, with Hongbin Li
[4] Model Improvements and Empirical Research for Prediction of Small and Medium-Sized Companies in the Stock Market, Journal of Quantitative and Technical Economics (数量经济技术经济研究), 2010, with Liyan Han
