Most Popular

Hayek, Local Information, and the Decentralization of Chinese State-owned Enterprises

Lixin Colin Xu, May 23, 2018

Hayek (1945) predicts that where local information is important, the organization of production should be decentralized. This prediction is tested and supported in the context of the decentralization of Chinese state-owned enterprises (SOEs). SOEs are more likely to decentralize with increasing distance from the seat of the oversight government. This likelihood is especially strong when performance heterogeneity is greater and/or transportation costs are higher.

China’s Joint Venture Policy and the International Transfer of Technology

Kun Jiang, Wolfgang Keller, Larry D. Qiu, William Ridley, Feb 06, 2019

China’s government mandates that foreign investors in certain industries form joint ventures with a domestic Chinese partner. We use a dataset that accounts for all joint ventures in China from 1998 to 2007 to show that this policy is successful in its aim of encouraging technology transfers from foreign investors to domestic operations. We find empirical evidence for the existence of at least three channels through which this transfer takes place.

Optimising Production: Industrial Policies in Networks

Ernest Liu, Mar 13, 2019

Many developing countries adopt industrial policies favoring upstream sectors. Liu (2018) shows these policies might enhance aggregate production efficiency. When sectors form a production network, market imperfections generate distortions that compound through input demand linkages, accumulating into upstream sectors and creating an incentive for...

Do Innovation Subsidies Make Chinese Firms More Innovative?

Hong Cheng, Hanbing Fan, Takeo Hoshi, Dezhuang Hu, Apr 24, 2019

The Chinese government has been using various subsidies to encourage innovations by Chinese firms. We examine the allocation and impacts of innovation subsidies, using the data from the China Employer Employee Survey (CEES). We find that the innovation subsidies are preferentially allocated to state-owned firms and politically connected firms...

Leverage-Induced Fire Sales and Stock Market Crashes

Jiangze Bian, Zhiguo He, Kelly Shue, Hao Zhou, Dec 03, 2018

The authors find that margin investors heavily sell their holdings when their account-level leverage edges toward the maximum leverage limits. Stocks that are disproportionately held by accounts close to leverage limits experience high selling pressure and abnormal price declines that subsequently reverse over the next 40 trading days. Unregulated shadow-financed margin accounts contributed more to the market crash even though these shadow accounts had higher leverage limits and held a smaller fraction of market assets.