Working papers

Abstract: How does international knowledge diffusion affect trade patterns, economic growth and welfare across the globe? This paper tackles this question by estimating a novel dynamic trade model where heterogeneous firms innovate. To motivate the analysis, I document stylized facts about international knowledge diffusion and technology adoption using comprehensive Chinese firm-level data on trade, patents and citations. To account for these patterns, I develop a dynamic general equilibrium model where firms learn from sellers when importing and choose to adopt foreign technologies when exporting. Firms’ sales and entry decisions in response to a trade cost reduction differ depending on the knowledge gap between the domestic and foreign countries. I structurally estimate the model with bilateral trade flows for the global economy. I find that knowledge diffusion substantially increases the gains from trade in all economies, ranging from 0.2% to 8.7%. However, foreign technology adoption can reduce welfare in knowledge-abundant countries as their technological advantage gets eroded. Technology adoption therefore alters the conventional gains from trade, with developed countries potentially benefiting from higher trade barriers.  

[funded by STEG PhD grant 1286] 

Abstract: Structural transformation, or service expansion, has significantly widened the gender employment and wage gaps in Sub-Saharan Africa. This contradicts the previous findings in developed countries. To reconcile this fact, we build a two-sector general equilibrium model with social stigma against women working in the service sector to show that structural transformation can reduce the female-to-male wage ratio if the social stigma is large enough. The model generates additional predictions about the intrahousehold bargaining power of females. Given a high social stigma, structural transformation can prevent female empowerment. We test the model using sectoral employment and individual bargaining data from 16 SSA countries. Using two-way fixed effect and instrumental variable estimations, we find robust results consistent with the model. 

Abstract: This paper proposes a new method of estimating non-stationary nonlinear dynamic general equilibrium models, with an application in the structural transformation context. By combining different sectoral growth rates with different factor intensities, I construct a three-sector general equilibrium model that generates a hump-shaped path for the size of the manufacturing sector while replicating the observed pattern of increasing and decreasing shares in services and agriculture. Using data for the United States and Sweden over the past decades, I implement a relaxation algorithm to solve the model for non-stationary paths of sectoral shares for given parameter values and then estimate the best fit for the model’s parameters. A counterfactual exercise for China shows the importance of trade in explaining structural change. This method can be easily generalized to solve similar problems in different contexts.


Work in progress

Publications