Working Papers

The Dynamic Efficiency of Policy Uncertainty: Evidence from the Wind Industry(January 2024)  Job Market Paper

Abstract: This paper investigates the dynamic efficiency of policy uncertainty in the US wind energy industry. Policy expiration embedded in the Production Tax Credit induced uncertainty among wind farm investors and expedited investment. I compile a comprehensive data set of the investment, production, and long-term contracts on the US wind energy market. I find significant bunching in the number of new wind farms at the expiration dates of the short policy windows and a large mismatch among wind farm investment timing, continuously improving upstream turbine technology, and evolving demand for wind energy. I then develop an empirical model featuring the bilateral bargaining of long-term contracts, endogenous buyer matching, and dynamic wind farm investment under policy uncertainty. Model estimates reveal that a lapse in policy extension reduced the perceived likelihood of policy renewal to 30%, and counterfactual simulations demonstrate that removing policy uncertainty postpones the entry of 53% of the affected cohort by 3.5 years. Removing policy uncertainty increases the net social surplus by 5.9 billion dollars and could save fiscal expenditure without sacrificing social welfare.

Entry Deregulation, Market Turnover, and Efficiency: China's Business Registration Reform, with Panle Jia Barwick, Shanjun Li, and Xiaobo Zhang. (April 2024)  

Revision requested at The Review of Economics and Statistics.

Abstract: Although entry regulation is ubiquitous across countries, comprehensive evaluations on how such regulations affect firm dynamics and productivity are lacking. We examine a 2012-2014 pilot program in Guangdong (which later became a national policy) that was designed to reduce firm registration costs and encourage entrepreneurial activities. We leverage the pilot program’s staggered implementation to address the key identification challenge of policy endogeneity. Using administrative data on firms’ business registrations and annual reports from 2008-2016, as well as field surveys, our analysis shows that the reform increased firm entry by 25% and firm exit by 8.7% in the manufacturing sector. Altogether, these newly registered firms as a result of the entry deregulation increased Guangdong’s total employment and revenue in the manufacturing sector by 2.5% and 1.8%, respectively. In addition, the productivity of post-reform entrants was 1.0% higher than the productivity of pre-reform entrants, likely due to the combination of relaxed financial constraints and more intense competition.


The Welfare Effects of Vertical Integration in China's Movie Industry, with Lisa Xuejie Yi and Chuan Yu.

American Economic Journal: Microeconomics,16(2). May 2024.

Abstract: This paper investigates the welfare effects of vertical integration in China's movie industry. We leverage data covering all theaters and 423 popular movies in China during 2014-2018. We find no evidence of integrated movies being foreclosed to rival theaters. Integrated theaters show their movies for longer, allocate more screenings, and charge lower prices. We estimate a model of consumers' demand and theaters' screening decisions. Integrated theaters internalize a substantial fraction of their upstream companies' profits. Vertical integration both mitigates distortions from revenue-sharing contracts and steers demand favoring integrated movies. Overall, vertical integration increases consumer surplus with considerable heterogeneity across markets.

Work in Progress

Policy Fragmentation and Capacity Misallocation in the Wind Industry

Market Efficiency under Tax Kinks: Evidence from Taiwan, with Elisa Yu-Chun Cheng and Hsing-Wen Han