07.05.2014   Holger Görg, University Kiel

Investment liberalisation, technology take-off and export market entry: Firm level evidence for China

We examine the role of foreign ownership structure in stimulating export market entry and R&D investment during a period of investment liberalisation following China’s accession to WTO in 2001. Focusing on firms with no prior exporting and R&D experience, we evaluate the effects of foreign acquisitions on the likelihood of exporting and investing in R&D for the first time. Using “doubly robust” propensity score reweighted logistic regression to control for the possible endogeneity of foreign acquisition and structure decisions, we uncover strong effects on export activity post-acquisition for all types of foreign ownership structure. We also find that targets that are taken over with a less than 100 percent foreign ownership share experience higher likelihood of R&D. This effect is very strong in the year of acquisition, while it is insignificant or even negative 2 years after acquisition. This suggests that acquired firms might transfer technology in the first year to avail of tax incentives and tacit encouragement by the Chinese government, but that these policies do not have a lasting effect as some acquirers shift the technology back over time.


21.05.2014   Melanie Schienle, Universität Hannover

Semiparametric Estimation with Generated Covariates

We study a general class of semiparametric estimators when the infinite-dimensional nuisance parameters include a conditional expectation function that has been estimated nonparametrically using generated covariates. Such estimators are used frequently to e.g. estimate nonlinear models with endogenous covariates when identification is achieved using control variable techniques. We study the asymptotic properties of estimators in this class, which is a non-standard problem due to the presence of generated covariates. We give conditions under which estimators are root-n consistent and asymptotically normal, derive a general formula for the asymptotic variance, and show how to establish validity of the bootstrap.


 06.06.2014   Torfinn Harding, Norwegian School of Economics

Institutions and the Location of Oil Exploration

The spatial distribution of natural resources is determined by natural geography alone. However, we show that the distribution of oil exploration is affected by the quality of countries’ institutions. A global data set on the precise location of oil wells and national borders allows for a regression discontinuity design and causal inference. Crossing a national border, moving from worse to better institutional quality, generates a positive jump in the predicted number of wells by 150% in the sample of developing countries. Correspondingly, a one standard deviation increase in institutional quality increases the likelihood of drilling by about 250%. The findings lend support to the hypothesis that institutions are a fundamental driver of economic performance.


25.06.2014  Natalia Danzer, Ifo Institut München

The Behavorial and Psychological Consequences of a Nucleas Catastrophe. The Case of Chernobyl


02.07.2014  Peter Kort, University Tilburg

Technological Change: A Burden or a Chance

This paper considers a firm that faces a declining profit stream for its established product.The firm has the option to invest in a new technology with which it can produce an innovative product while having the option to exit as well as suspend operations at any point in time. Besides timing the firm also has to decide about the size of investment. Considering fixed capacity size, earlier work showed that higher uncertainty might accelerate investment timing. We show that introducing the capacity decision restores the standard result that higher uncertainty delays investment timing. Higher potential profitability of the innovative product market increases the incentive to invest earlier. However, we find that it does not affect the optimal investment size. Furthermore, we get the at first sight counterintuitive result that the firm invests in smaller capacity the larger the growth in the innovative product market. We also obtain that the effect of uncertainty on the exit threshold is non-monotonic when taking into account the capacity choice decision.


09.07.2014   Maarten Bosker, Erasmus Universiteit Rotterdam

A theory of trade in a global production netword

This paper develops a novel theory of trade in a global supply chain. We expand on a monopolistic competition trade model. Countries produce both intermediate and final goods that are sold domestically or, incurring country-pair specific trade costs, internationally. This links countries in a multi-stage production network. In the unique general equilibrium of the model, goods prices and wages in each country depend on the entire structure of trade connections. Drawing on methods from the social network literature, we then determine each country’s importance in the global production network and analyse the welfare consequences of a further integration of the network. Our findings highlight the role of a few key countries that bring other nations closer together by intermediating their value added. Proximity to these key countries is crucial for other nations’ income growth. An accompanying empirical analysis shows strong support in favor of the predicted network effects (JEL codes: C67, F12, F63).


16.07.2014  Rachel Shinnar, Appalachian State University