Recently, Yu Miaojie, a professor at Liaoning University, was selected for the 2023 "IEA Fellow Award" list. Professor Yu Miaojie is a deputy to the 14th National People's Congress, a member of the Standing Committee of the 14th Liaoning Provincial People's Congress, deputy secretary of the Party Committee and president of Liaoning University, and he has become the fourth Chinese economist to be awarded the Fellowship by the International Economic Association after Professor Qian Yingyi of Tsinghua University, Professor Wu Jinglian of the Chinese Academy of Social Sciences, and Professor Lin Yifu of Peking University, and the only economist from China among the 12 "Fellows of the International Economic Association" in the world in 2023. This issue selects 6 bilingual articles by Professor Yu Miaojie on the JTP platform, welcome to read!
Selected Articles
Liberalization of intermediate inputs and the market power of firms in the labor market.
input trade liberalization and firms’ labor market power
[Summary].From the perspective of imperfectly competitive labor markets, this paper examines the impact of liberalization, represented by the reduction of import tariffs on intermediate inputs, on the market power of firms in the labor market. Using the data of Chinese industrial enterprises and customs data, this paper constructs the import tariff of intermediate inputs at the firm level. The empirical research shows that the reduction of import tariffs on intermediate inputs expands the output scale of enterprises, increases the proportion of intermediate input factors and makes enterprises move to the upstream of the industry through the cost-saving effect and factor substitution effect, thereby enhancing the labor market power of enterprises. This result is robust for different measures of labor market power, measures of import tariffs on intermediate inputs, and regression samples. While implementing liberalization, it is necessary to limit the collusion of enterprises in the labor market, provide diversified and complete vocational training and complete public services, enhance the mobility and competitiveness of the labor market, and protect the rights and interests of workers.
【abstract】before and after joining the wto in 2001, china slashed import tariffs and liberalized trade. however, at the same time, the proportion of china’s labor income has been declining, and the lag of labor compensation growth has been increasing. to explain this phenomenon, existing literature explored the impact of trade liberalization on china’s labor income, labor productivity, and labor income share. however, these studies ignored the imperfect competitiveness of the labor market. labor economics literature highlighted that when the labor market is not perfectly competitive, firms can use their market power in the labor market to lower wages below the value created by workers, resulting in wage markdown, and ultimately reducing labor income. therefore, based on the imperfect competitiveness of the labor market, this **explores the impact of trade liberalization, represented by import tariff reductions, on the firms’ labor market power, complementing existing literature on the influence of trade on labor income share.this **uses the matching data of china’s industrial enterprise database and customs database from 2000 to 2006 for empirical research. the empirical results show that the reduction of intermediate input import tariffs has both a cost s**ing effect and a factor substitution effect. specifically, when the tariff on intermediate inputs falls, firms can import them at a lower price, which is reflected in the increase in the proportion of imported intermediate inputs of enterprises, and at the same time move to the upstream industries that use these inputs more intensively, such that the output scale of firms expands and, ultimately, firms’ market power in the labor market increases. at the same time, the reduction of import tariffs on final goods has no significant impact on the firms’ labor market power.the contribution of this **to existing literature relates to the following three aspects. first, this **more accurately measures the level of trade liberalization of intermediate inputs faced by firms. since chinese firms often import a variety of products and cover multiple industries, industry tariffs cannot accurately reflect the true trade barriers faced by firms. at the same time, the construction of intermediate input tariffs at the industry level requires the use of input-output tables. on the one hand, this would mix domestic intermediate inputs with imported intermediate inputs, where the former is not directly affected by trade liberalization. on the other hand, the construction of the input-output table is based on large-scale enterprises, which will cause sample selection problems. in addition, during the sample period, processing trade firms accounted for a large proportion of china’s total trade. because these firms do not need to pay tariffs when importing raw materials and intermediate inputs, there are clear measurement errors in using industry tariffs to measure the level of trade liberalization faced by firms. second, this **explores the mechanism by which intermediate import tariffs affect firms’ labor market power. the reduction of import tariffs on intermediate inputs has both a cost s**ing effect and a factor substitution effect, which affects the firms’ market power by influencing the output scale, the proportion of factor inputs, and the position in the industrial production chain. finally, this **supplements the literature on the decline of labor’s income share and the deviation of labor compensation from labor’s contribution to production. this **has strong policy implications. while promoting trade liberalization, firms’ collusion in the labor market should be limited, and diversified and comprehensive vocational training and public services should be provided. moreover, the labor market should be more mobile and competitive to protect workers’ rights and interests.
Creative destruction, the development of entirely new products, or the improvement of product quality? -- Accounting for the innovation dimension of Chinese export enterprises.
creative destruction, new varieties, or improvements of existing products? innovation accounting of chinese exporting enterprises
[Summary].The contribution of innovation to TFP can be realized through the creative destruction of new entrants and incumbents, the development of new products, and the improvement of existing product quality by incumbents, but the existing literature lacks a measure of the relative importance of these three innovation channels. In this paper, the parameters of the structural model are calibrated by using the simulation moment estimation method, and the contribution of different innovation activities to TFP is indirectly calculated through the change of the number of employees in the enterprise. We found that more than 60% of TFP growth came from incumbents innovating their existing products. However, the contribution of new entrants to TFP growth increased from 1776% increased to 32 in 2002-200798%, indicating that new entrants are becoming more and more important in their innovation activities. Moreover, the contribution of exporters to the growth of TFP through the development of new products is much greater than that of non-exporters. Non-exporters contribute more to TFP growth through creative destruction than exporters.
【abstract】under the new normal, promoting innovation, high-quality development and the transformation of china’s economic development from investment-driven mode to innovation-driven mode is the top priority of national policies. it is necessary for us to decompose the change of total factor productivity (tfp) of china’s economy in detail and sort out the relative importance of different channels of tfp growth in china, so as to provide reference for policies of promoting tfp growth. in addition, because of the relationship between tfp and export decision-**and the relationship between innovation and export, understanding the similarities and differences between export enterprises and non-export enterprises in innovation channels is also of great significance for building a new development pattern of dual circulation. existing literature on the contribution of innovation to tfp carries out discussion mainly from three mechanisms, namely, creative destruction, improvement of enterprises’ product quality and research and development of new products. however, because it is difficult to directly distinguish the three kinds of innovation activities in empirical research, there is a lack of measurement of the relative importance of the three innovation channels. in this **different forms of innovation activities of enterprises are combined with the change of the number of employees in enterprises, and a mapping between them is constructed. by using enterprise labor force data and simulated moments estimation method, this **indirectly calculates the contribution of different innovation activities to tfp through the change of the number of employees in enterprises. we find that the main source of tfp growth in china from 1998 to 2007 was the improvement of incumbent enterprises’ product quality, and its contribution was 75% during 1998–2001, which dropped to 60.1% during 2002–2007. the contribution of new entrants’ creative destruction to tfp growth increased from 17.8% during 1998–2001 to 27.3% during 2002–2007, and the contribution of new entrants’ r&d of brand-new products increased from 0.17% to 5.69%, indicating that new entrants were more active in creative destruction and r&d of brand-new products during 2002–2007. furthermore, we discuss the relative importance of different sources of tfp growth of export enterprises and non-export enterprises. the difference between export enterprises and non-export enterprises in innovation is that the contribution of export enterprises to tfp growth is far greater than that of non-export enterprises in terms of r&d of brand-new products. compared with export enterprises, non-export enterprises contribute more to tfp growth through creative destruction. the reason may be that high-productivity enterprises, involved in international trade, h**e more opportunities to learn foreign advanced technologies, so that their success rate of developing brand-new products and the quality of their brand-new products are improved. oriented to foreign markets, export enterprises focus on the needs of the international market more than on domestic demand when developing new products. compared with previous literature, this **has contributions in the following three aspects. first, researchers in the field of international trade h**e put forward many mechanisms for trade to promote productivity, but the importance of these mechanisms is not clear. this **indirectly calculates the contribution of different innovation activities to tfp through the change of the number of employees, so that we can understand the relative importance of these mechanisms. second, this **builds on existing literature on the sources of economic growth in china, and specifically answers the question of how innovative activities promote the redistribution of labor factors among enterprises. third, this **contributes to measuring the value of innovation. this **has certain significance for understanding the growth source of tfp and the relationship between employment and innovation, promoting the scientific formulation of china’s scientific and technological innovation policy and building china’s strength in science and technology in a way which is suitable for china’s national conditions.
External demand, competitive strategy and export behavior of multi-product firms.
foreign demand, competitive strategy and export beh**ior of multi-product firms
[Summary].This article is drawn on Mayer et al(2016) This paper constructs an exogenous external demand index as much as possible, and studies the differential influence effect and mechanism of external demand on the export behavior of multi-product enterprises adopting quality competition and cost competition strategies. This paper puts forward a research hypothesis on the basis of expounding the relevant typical facts and sorting out the theoretical mechanism, and conducts an empirical test based on the matching data of the China Industrial Enterprise Database and the China Customs Database from 2000 to 2013. The conclusion of the study shows that the positive (negative) external demand changes lead to the multi-product enterprises adopting the quality competition strategy to increase (decrease) their core export products**, increase (decrease) the scope of export products, and expand (decrease) the dispersion of export product distribution. Changes in external demand have the opposite effect on the export behavior of multi-product firms that adopt cost competition strategies. The above conclusions are still valid in the robustness tests such as changing the calculation method of external demand, considering the endogeneity problem, and eliminating the extreme value. The analysis and test of the mechanism of action show that the change of external demand changes the degree of market competition faced by enterprises in the destination. Enterprises that adopt a quality competition strategy mainly respond to changes in the quality of their core products, while those that adopt a cost competition strategy mainly respond to changes in external demand by changing the cost of core products. This paper lays a theoretical foundation and provides policy enlightenment for multi-product enterprises to effectively respond to changes in external demand, make correct export behavior decisions and promote high-quality development.
【abstract】since the global financial crisis in 2008, the growth rate of china’s exports has slowed down significantly. the **erage annual growth rate of exports during 2009–2018 was 6.95%, which was much lower than the **erage annual growth rate of exports (28.47%) during the period before wto accession and the financial crisis (2002–2008). the weak external demand from developed countries caused by the financial crisis was one of the main factors for the rapid decline of china’s export growth. in recent years, the increasing trend of trade protectionism and counter-globalization, such as brexit and the revitalizing of us manufacturing, has further exacerbated the uncertainty of china’s exports to developed markets. this **intended to study how the external demand of export destinations affected the export beh**iors of chinese firms. this **calculated external demand at the firm-destination-year level based on total imports at the destinations (excluding china’s exports), an indicator that is not influenced by the exporting firms, thus ensuring the exogeneity of the variable of external demand. according to stylized facts, external demand variations h**e opposite statistical relationships with the export beh**iors of multi-product firms adopting quality-competitive and cost-competitive strategies. therefore, this **aimed to investigate the differential effects of external demand on the export beh**iors of multi-product firms adopting quality-competitive and cost-competitive strategies and the mechanisms. an empirical study was conducted based on matched data from the china industry business performance database and the chinese customs database from 2000–2013. the findings showed that positive (negative) external demand variations led multi-product firms with the quality-competitive strategy to increase (decrease) the price of their core export products, increase (decrease) the range of export products, and extend (decrease) the distribution dispersion of their export products to a greater extent; and the external demand variations had exactly the opposite effect on the export beh**iors of multi-product firms with the cost-competitive strategy. the above findings still held in the robustness tests such as changing the method of calculating external demand, considering the endogeneity problem and excluding extreme values. the mechanism of action analysis and tests showed that external demand variations changed the degree of competition in the destination market faced by firms, with positive external demand increasing the degree of market competition and negative external demand decreasing the degree of market competition; and firms adopting the quality-competitive strategy responded to external demand variations mainly by changing the quality of their core products, while firms adopting the cost-competitive strategy responded to the variations in the cost of their core products. this **found that the export beh**iors of firms with different competitive strategies are opposite, which revealed that when responding to external demand, firms should first identify whether they adopted quality- or cost-competitive strategies and make corresponding decisions on export beh**iors based on those strategies.
RMB Exchange Rate and Outward Foreign Direct Investment by Chinese Enterprises: A Service-oriented Investment Perspective.
renminbi exchange rate and chinese firms’ outward direct investment: from the perspective of distribution odi
[Summary].This paper examines the impact of exchange rate changes on firms' outward direct investment and finds that the depreciation of the renminbi not only promotes exports, but also promotes outward direct investment. This phenomenon is contrary to the finding in most countries that a depreciation of the home currency discourages investment. This article illustrates this phenomenon from the perspective of service-oriented investment. Service-oriented investment has the characteristics of reducing variable costs in cross-border communication costs and domestic distribution costs; Compared with production-based investment, it has a lower fixed cost of investment. Therefore, service investment for enterprises with high productivity is the best choice for profit maximization, so service investment has become an important part of China's outward FDI. Because of its role as an auxiliary rather than a substitute for exports, the depreciation of the renminbi not only promotes exports, but also promotes first-class service-oriented investment. This paper enriches the understanding of the impact of exchange rate changes on China's outbound investment.
【abstract】outward direct investment (odi) is usually found to be hampered by home currency depreciation in most countries while export is encouraged. this article shows the opposite findings concerning china that odi increases in responses to renminbi depreciation. distribution odi helps reduce cross-border communication costs and other variable costs that incur in export and lower fixed costs compared with non-distribution (production) odi. thus, only the most productive firms opt to engage in production odi whereas less productive firms, such as many chinese enterprises, opt to engage in distribution odi. in this regard, distribution odi is an auxiliary rather than a substitute to export. the article enriches our understanding of the nexus among odi, export, and exchange rate movement.
The economic impact and poverty alleviation effect of the China-ASEAN Free Zone.
china-asean free trade area: economic influence and poverty reduction effect
[Summary].The China-ASEAN Free Trade Area is the world's most populous free trade area and the third largest economic cooperation zone in terms of global GDP. Most of the FTA members are developing countries, which are facing the common challenges of economic development and poverty eradication. The establishment of the China-ASEAN Free Trade Area (CAFTA) not only has a huge economic impact, but also has a crucial poverty reduction effect. Since the initial signing of the agreement in 2002, the China-ASEAN Free Zone has reached a number of economic cooperation agreements in the fields of investment, investment and infrastructure construction, promoted the liberalization of investment and investment, promoted the economic growth of China and ASEAN, and promoted the development of poverty reduction in the world. This paper reviews the establishment process of the China-ASEAN Free Trade Area, sorts out the promotion measures of the FTA in the field of investment and the infrastructure construction cooperation between the two sides, and analyzes the development status and characteristics of China and ASEAN countries in terms of investment and investment, as well as its economic impact and poverty reduction effect. Finally, this paper expounds the main problems existing in the free trade zone and puts forward corresponding policy recommendations. In the future, promoting world connectivity and investment liberalization will continue to be a good recipe for poverty alleviation in the world.
【abstract】the china-asean free trade area (cafta) is the most populous free trade area in the world and the third largest economic cooperation area in the world. most cafta member countries are developing countries and face the common challenge of economic development and poverty eradication. the establishment of the cafta not only bears huge economic significance, but also has a crucial poverty reduction effect. since 2002, when china and the asean signed an agreement to establish the cafta, a number of economic cooperation agreements h**e been reached in the fields of trade, investment, and infrastructure construction, which h**e contributed to the liberalization of trade and investment, the economic growth of china and asean countries and the progress in poverty eradication. this article reviews the establishment of the cafta, summarizes the measures in trade and investment promotion and the cooperation in infrastructure construction.; it analyzes the status quo of trade and investment between china and asean countries, the economic influence and poverty reduction effect of the cafta. finally, the article elaborates on the main challenges facing the cafta and puts forward policy suggestions. in the future, promotion of global connectivity and liberalization of trade and investment will remain a very effective way to reduce poverty.
Capacity utilization measurement and productivity estimation of industrial enterprises.
capacity utilization rate measurement and productivity estimation for industrial firms
[Summary].Executive summary: Accurately measuring capacity utilization is key to understanding and addressing overcapacity. Based on the correspondence between capital depreciation rate and capacity utilization rate at the enterprise level, this paper introduces the role of capacity utilization rate into the production function estimation framework, and develops a method for estimating capacity utilization rate and productivity at the same time. This method clearly defines the concept of capacity utilization and has a wide range of applicability. This paper uses this method to estimate the capacity utilization rate of Chinese industrial enterprises from 1998 to 2007 and 2011 to 2013, and the results show that: 1) ignoring the change in capacity utilization rate underestimates the productivity level of Chinese industrial enterprises in general; 2) Before 2007, the capacity utilization rate of China's industrial enterprises experienced an overall upward process, but then declined; 3) Firms of different nature are highly heterogeneous, with firms with higher productivity, lower capital stock per capita, higher export-to-output ratios, and higher profit margins tend to have higher capacity utilization.
【abstract】summary: overcapacity of specific industries, such as steel and coal, has been viewed as one of the most important and extensively discussed economic issues of china. the main feature of overcapacity is a massive amount of idling capacity, often considered to be a sub-optimal situation. the overcapacity of the steel industry is also closely related to low export price. therefore, it turns out to be the most common fuse of trade disputes between china and developed economies, such as the u.s. and european union. since the late 1990s, the chinese government has initiated five rounds of policies aiming to tackle overcapacity. however, overcapacity keeps emerging periodically in some specific industries despite government’s efforts. since 2012, reducing overcapacity of particular industries has been listed as one of the primary economic goals of the chinese government. by definition, overcapacity is a low level of capacity utilization. therefore, the key to understanding overcapacity is to precisely measure capacity utilization rate. however, current methods of measurement, such as data envelopment analysis and stochastic production frontiers, are far from satisfaction because both concepts are used to define overcapacity or their underlying assumptions. based on the definition of greenwood et al. (1988) and the conceptual framework of ackerberg et al. (2015), we developed a new method to measure capacity utilization rate. we defined the capacity utilization rate as capital utilization intensity and incorporated flexible capacity utilization rate into the production function estimation framework. our underlying assumption is that higher capacity utilization leads to higher depreciation rate of capital. thus, we can use capital depreciation rate as a proxy variable to estimate capacity utilization rate and total productivity factor simultaneously. our method requires weaker assumptions, offers a more precise and intuitive characterization of overcapacity, and is more amenable to various extensions. empirically, we applied our method to chinese industrial enterprise database. collected and maintained by the national bureau of statistics, the database provides the most comprehensive micro-level information of chinese industrial firms. it contains information on depreciation as well as inputs and outputs information for production function estimation. we estimated the capacity utilization rate and total factor productivity of chinese industrial firms from 1998 to 2007 and from 2011 to 2013. our results show that ignoring flexible capacity utilization would overestimate the elasticity of labor input on output and underestimate the elasticity of capital input. for most industries, this will lead to underestimation of firm-level productivity. our results suggest that productivity of chinese industrial firms has increased in the sample period. compared with estimates of previous methods of capacity utilization, our estimates are much closer to the estimates obtained via direct investigation and more consistent with the macroeconomic background. chinese industrial firms experienced an overall rise in capacity utilization rate from 1998 to 2007 and a drop around 2012. we also explored the variations in capacity utilization across firms. firms with higher productivity, lower capital intensity, higher export intensity and profit ratio are associated with higher capacity utilization rate. foreign-owned firms h**e the highest capacity utilization while state-owned enterprises h**e the lowest one. we also observed substantial regional variations in capacity utilization across provinces. the policy implication of the results is that to tackle overcapacity efficiently, policymakers should take into account the heterogeneity of overcapacity along different dimensions. the most important contribution of this **lies in developing a new method of capacity utilization and utilization-adjusted total productivity factor. there are still a lot of controversies on the causes of and solutions to china’s overcapacity problem. this **tries to offer a benchmark framework to understand all these issues. we also provided some tentative and descriptive evidence to explore the variations in capacity utilization. future research agenda concerning the mechanisms that give rise to overcapacity and the evaluation of related policies could be carried out based on the estimation strategy and results of this **
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