Refereed Publications:

Working Papers:

Abstract:  We develop a quantifiable multi-country, multi-sector endogenous growth model in which comparative advantage is endogenously determined by innovation and knowledge diffusion. We quantify the effect of a trade liberalization on innovation, comparative advantage and welfare. Changes in trade frictions reallocate innovation and comparative advantage across sectors: innovation reallocates towards sectors with larger increases in comparative advantage, and comparative advantage reallocates towards sectors with stronger knowledge spillovers. Knowledge spillovers amplify the effect as countries and sectors benefit from technology developed elsewhere. In contrast to one-sector models without knowledge spillovers, we find significant dynamic gains from trade, driven by innovation and diffusion.

Abstract: This paper examines whether the rapidly growing firm patenting activity in China is associated with real economic outcomes by building a unique dataset uniting detailed firm balance sheet information with firm patent data for the period 1998-2007. We find strong evidence that within-firm increases in patent stock are associated with increases in firm size, export, and more importantly, firm productivity and new product revenue share. Event studies of initial patent applications, using first-time patentees as the treatment group, and nonpatenting firms---selected based on the Propensity-Score Matching method---as the control group, also generate similar findings. State-owned enterprises have higher productivity-patenting elasticities than private firms. Changes in productivity associated with patenting, however, should not be interpreted as being caused by patenting, as our instrumental variable analysis does not indicate that patenting has a significant effect on productivity.

Abstract:  A recent popular view is that the height of trade barriers in prime export sectors have a strong effect on current account balances: countries specializing in sectors that face relatively high trade costs, such as services, tend to run current account deficits, and similarly, countries specializing in low trade cost sectors, such as manufacturing, tend to run current account surpluses. We test this view using data on sectoral bilateral trade flows. Imposing a parsimonious structure of trade, we infer comparative advantage and trade barriers by sector for a large sample of countries covering 1970-2014. We then construct  effective trade costs---trade costs weighted by sectoral comparative advantage---to gauge the height of a country's overall trade barriers. Results reveal that, while higher effective exporting costs are associated with lower current account balances, their impact is quantitatively limited. Effective costs of importing often have no statistically significant effect. These findings are consistent with theories that suggest limited transitional effects and support the view that the current account is primarily a macroeconomic phenomenon.

Abstract: This paper studies how the composition of knowledge, in addition to the amount of knowledge capital, a country possesses matters for development. We develop a multi-sector model of innovation, trade and growth, in which sectors differ in terms of their knowledge applicability in innovation in other sectors. The model describes how countries allocate R&D in different sectors and how the endogenous cross-country variations in knowledge composition matters for income difference. It yields new insights that trade costs—besides reducing trade volume— impede aggregate innovation efficiency through the within-country allocation of R&D towards sectors with lower knowledge applicability, demonstrating a “composition effect”. We construct measures quantifying the sector-specific knowledge applicability using cross-sector patent citations. Based on this index, we present cross-country evidence that supports the model’s main implications: (a) countries that are more geographically remote tend to export disproportionately less in highly applicable sectors; (b) the “applicability bias” of a country’s knowledge structure is positively associated with its income level.

Work in Progress
  • "The Granularity of Corporate Saving" with Mai Dao, Isabel Hanisch, Callum Jones, 2018.
  • "Predicting Sudden Stops: A Machine Learning Analysis" with Suman Basu, Roberto Perrelli and Weining Xin, 2018.
  • "Informality Distortions and Productivity: The Case of Mexico" with Jorge Alvarez, Chris Papageorgiou,and Cian Ruane, 2018.
  • "Fear of Floating and Product Structure" with Chuan Li, 2016.
  • "Large and Persistent Current Account Surpluses and Their Reversals" with Emine Boz, 2017.

Other Writings

Comments and Discussions

  • Discussion of "Technology Shocks: Novel Implications for International Business Cycles"  by Andrea Raffo, NBER Summer Institute IFM, July 2009

  • Discussion of "Capital Obsolescence and Agricultural Productivity" by Julieta Caunedo and Elisa Keller, 2nd Workshop on Macroeconomic Policy and Income Inequality, IMF, Oct 2015

  • Discussion of "Firm Entry and Regional growth Disparities: the Effect of SOEs in China" by Loren Brandt, Gueorgui Kambourov and Kjetil Storelsetten, 1st IMF-Atlanta Fed Joint Workshop on China's Economy, May 2016.