Microeconomics & International Trade Seminars

Thursdays, 1:40 - 3:00 PM
via Zoom


Fall 2020

October 8
Jaya Wen, Harvard Business School
"The Political Economy of State Employment and Instability in China" 
Host: Ajay Shenoy
This paper demonstrates that China uses state employment to promote social stability via job provision. I present new facts about state-owned enterprise (SOE) employment consistent with a stability motive and then build a model of government-subsidized, stability-oriented state employment. I test model predictions using variation from an ethnic conflict in China’s Xinjiang province and find that, in times and places with a higher threat of unrest spillover, SOEs hire more male minorities. Concurrently, male minority wages rise and private firms hire fewer people from this group. A quantification exercise suggests that SOEs implicitly receive a 26% subsidy on male minority wages.

October 22
Rob Garlick, Duke University
"Job Search and Hiring with Two-sided Limited Information about Workseekers’ Skills"
Host: Ajay Shenoy
We present field experimental evidence that limited information about workseekers’ skills distorts both firm and workseeker behavior. Assessing workseekers’ skills, giving workseekers their assessment results, and helping them to credibly share the results with firms increases workseekers’ employment and earnings. It also aligns their beliefs and search strategies more closely with their skills. Giving assessment results only to workseekers has similar effects on beliefs and search, but smaller effects on employment and earnings. Giving assessment results only to firms increases callbacks.  These patterns are consistent with two-sided information frictions, a new finding that can inform design of information-provision mechanisms.

October 29
Alina Arefeva, Wisconsin School of Business at UW Madison
"Who Benefits from Place-Based Policies? Job Growth from Opportunity Zones"
Host: Jessie Li
The Tax Cuts and Jobs Act of 2017 established a new program called “Opportunity Zones” that created tax advantages for investment locating in Census tracts with relatively low income or high poverty. Importantly, only 25% of eligible tracts in each state could be designated as an Opportunity Zone. We use detailed establishment-level data and a difference-in-difference (DiD) approach to identify the designation of a tract as an Opportunity Zone on job creation. We find the Opportunity Zone designation increased employment growth relative to comparable tracts by a statistically significant 2-4 percentage points over the 2017-2019 period. This result holds for many different industries and for a variety of skill levels.

November 12
Meredith Startz, Dartmouth
"Cutting Out the Middleman: The Structure of Chains of Intermediation"
Host: Alan Spearot
Although trade models typically assume that producers sell directly to consumers around the world, finished goods may in fact pass along a whole chain of intermediaries. Using original survey data from Nigeria, we document that there are at least three separate intermediaries between an international manufacturer and a Nigerian consumer on average, and that the characteristics of these intermediaries and their transactions are systematically related to their position along the distribution chain. We build a general framework for understanding the formation of chains with multiple intermediaries and illustrate their implications for consumer welfare and measuring trade costs. Contrary to the common intuition, consumers can actually benefit from being at the end of longer chains of intermediation. Taking chains into account also suggests that existing estimates of distance costs in developing countries are biased upward, and may contribute less to consumer-producer price gaps than typically thought. We then build a quantifiable version of the general model, which relates the endogenous chain structure through which goods actually reach consumers in a particular market to fundamentals of geography and demand in many locations, and calibrate it in the context of Nigerian wholesale trade. 

November 19
Achyuta Adhvaryu, University of Michigan Ross Business School
"Organizational Responses to Product Cycles: Evidence from Auto Manufacturing"
Host: Ajay Shenoy
Product cycles are a fundamental feature of innovation, growth, and survival in many industries. Firms develop new generations of products to  remain profitable when the production of current generations becomes imitable.  This phenomenon often entails the mass production of new — and often increasingly complex — products on a regular basis. How does the firm manage this highly dynamic production environment? In this project, we study how the organization of the firm changes endogenously in response to product cycles. We focus on the production of new models of automobiles, a prototypical example of product cycles.  We use granular administrative data from a leading global auto manufacturer to demonstrate the organizational impacts of the introduction of new models on the auto assembly line.  Using event study and discontinuity-based methods, we show that demand (number of vehicles) and number of total parts do not change in the short term after a new model is introduced; the main change is a large, discontinuous increase in new parts. The production of new models thus necessitates learning-by-doing: we accordingly show that defects per vehicle increase substantially after the production change, and decrease to their prior level over a period of 2-3 weeks. We next ask how the firm’s organization facilitates this problem-solving. Guided by a canonical model of knowledge-based hierarchies, we show that navigating the learning-by-doing induced by product cycles involves an increase of frontline employment coupled with an accordion-like contraction and expansion of management layers. We find clear evidence in support of these predictions in our data. We contrast these results with the impacts of a demand shock, for which we show the organizational response is a monotonic increase in both employment and management layers, consistent with prior evidence from manufacturing in high-income countries. In sum we seek to document the surprising flexibility of organizational structure in response to product cycles, and the extent to which organizational changes allow firms to survive and grow in highly dynamic markets. 

December 3
Sung Ah Bahk, American University
"Regulating Conglomerates in China: Evidence from an Energy Conservation Program"
Host: Brenda Samaniego
How does energy regulation affect production and energy use within conglomerates? We study the effects of a large program aimed at reducing energy utilization of large Chinese companies. We conduct a difference-in-differences analysis that compares firms across sharp size-based criteria for regulation. Directly regulated firms experience declines in both production output and energy usage, but regulated firms do not see increases in energy efficiency. Using detailed data on business registrations, we link regulated firms to non-regulated firms that are part of the same conglomerate. We identify large spillovers across cross-owned non-regulated firms, which see increases in both output and energy utilization. We then use a calibrated model where conglomerates reallocate production across related firms to study the aggregate effects of the policy on allocative efficiency and energy consumption. Within conglomerate spillovers counter the direct effects on energy conservation of regulated firms and lead conglomerates to allocate resources to less productive and potentially less energy efficient firms.

December 10 
Juan Carlos Suarez Serrato, Duke University
Host: Brenda Samaniego