Job Market Paper
How Do Robot Subsidies Affect Aggregate Productivity and Firm Dispersion? Theory and Evidence from China draft
Presentations: LSE Macro Seminar, Tsinghua University - China Financial Research Network Workshop
Presentations: LSE Macro Seminar, Tsinghua University - China Financial Research Network Workshop
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Abstract: This study examines the effects of the robot subsidy policy in China's manufacturing sector. The demand-side subsidy policy aims at encouraging manufacturing firms to invest in robotics by lowering the cost of purchase. Exploiting differences in the timing of the subsidy implementation across municipalities, I find the introduction of a robot subsidy has heterogeneous impacts across firms of different scale. Although the subsidy results in a 13 percent increase in applications for robot patents, the facilitated access to robotics leads to a 14 percent reduction in new firm's entry in the manufacturing sector, along with a significant increase in turnovers (7.8 percent), total assets (6.4 percent) and employments (5.8 percent) of bigger industrial enterprises. Using a stylised model, I show that the interaction between financial frictions and endogenous automation helps reconcile the empirical findings: ex-ante capital misallocation causes a uniform subsidy to disproportionately benefit firms with better access to capital. The distortion creates an efficiency trade-off: while a subsidy can enhance overall automation, it also exacerbates automation dispersion, which reduces efficiency. To quantify the net efficiency impact of these competing forces, I embed this mechanism into a dynamic heterogeneous firm model, calibrated to match key features of the Chinese industrial sector. The model indicates that a robot subsidy of 20% narrows the gap between mean and optimal automation levels by 22 percentage points, while raising automation dispersion by 49 percentage points. This leads to a 1.2 percent increase in aggregate output, along with a 2.4 percent decline in total factor productivity. Measured in a utilitarian appraoch, my calibration suggests a robot subsidy below 10 percent can improve the social welfare by 0.23 percent, while its impact becomes negative when its intensity surpasses 20 percent. This dynamic model also proposes a novel mechanism that automation exacerbates capital misallocation by enlarging asset accumulation dispersion between workers and entrepreneurs. Controlling for this dynamic feedback could enhance the subsidy-induced output gain by an additional 26%.
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Research Projects
2. Credit Reallocation and Skill-Biased Technology Adoption in Recessions
3. Automation, Financial Frictions and the Business Cycle
4. Trapped in Flood? Migration Decisions in Response to Floods in China (with Yuxiao Hu)
5. Natural Disasters and Spatial Patterns of Innovation (with Haoyu Gao, Yuxiao Hu, and Peixuan Zhao)
Pre-Doctoral Publication
How Housing Price Affects Labour Migration? (with Li Zhang, and Jing He)
Chinese title: 房价如何影响劳动力流动?; published at Economic Research Journal 经济研究 (Top 3 Chinese Journal In Economics)
Abstract: The continuous growth of housing prices in China has significantly outpaced wage increases. Does this trend suppress the influx of migrant labor? We analyze this question in this study. Theoretically, it argues the dual effects of housing prices: the pulling effect and the resistance effect. On one hand, housing prices signal the characteristics of alternative cities, reducing the uncertainty of expected future income and thus attracting labor. On the other hand, high housing costs compress disposable income, creating resistance. These two effects combine to form an inverted U-shaped impact on labor mobility. Empirically, this paper uses data from the 2012 and 2014 China Labor Dynamics Survey (CLDS) and matches it with housing price data from 250 prefecture-level cities between 2000 and 2012 to create a micro-database. The findings confirm that housing prices indeed have an inverted U-shaped effect on labor mobility. The results remain robust even after controlling for endogenous issues, measurement errors in housing prices, characteristics of the place of origin, and migration motivations. Additionally, this paper examines the heterogeneous impacts of various factors such as education level, skill level, family class, and household registration (hukou). It finds that high-skilled labor has a smaller inverted U-shaped inflection point and is more sensitive to housing prices due to their stronger demand for homeownership. The inverted U-shaped impact is mainly observed in large cities, with coastal cities having a larger inflection point. Currently, most cities, except for some first-tier cities, exhibit a pulling effect on labor due to housing prices.
Chinese title: 房价如何影响劳动力流动?; published at Economic Research Journal 经济研究 (Top 3 Chinese Journal In Economics)
Abstract: The continuous growth of housing prices in China has significantly outpaced wage increases. Does this trend suppress the influx of migrant labor? We analyze this question in this study. Theoretically, it argues the dual effects of housing prices: the pulling effect and the resistance effect. On one hand, housing prices signal the characteristics of alternative cities, reducing the uncertainty of expected future income and thus attracting labor. On the other hand, high housing costs compress disposable income, creating resistance. These two effects combine to form an inverted U-shaped impact on labor mobility. Empirically, this paper uses data from the 2012 and 2014 China Labor Dynamics Survey (CLDS) and matches it with housing price data from 250 prefecture-level cities between 2000 and 2012 to create a micro-database. The findings confirm that housing prices indeed have an inverted U-shaped effect on labor mobility. The results remain robust even after controlling for endogenous issues, measurement errors in housing prices, characteristics of the place of origin, and migration motivations. Additionally, this paper examines the heterogeneous impacts of various factors such as education level, skill level, family class, and household registration (hukou). It finds that high-skilled labor has a smaller inverted U-shaped inflection point and is more sensitive to housing prices due to their stronger demand for homeownership. The inverted U-shaped impact is mainly observed in large cities, with coastal cities having a larger inflection point. Currently, most cities, except for some first-tier cities, exhibit a pulling effect on labor due to housing prices.