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Demand forces of technical change evidence from the Chinese manufacturing industry


Beerli, Andreas; Weiss, Franziska J; Zilibotti, Fabrizio; Zweimüller, Josef (2018). Demand forces of technical change evidence from the Chinese manufacturing industry. Working paper series / Department of Economics 277, University of Zurich.

Abstract

This paper investigates the effct of domestic market size on innovation activities across different durable good industries in the Chinese manufacturing sector. We address the endogeneity of market size by an IV strategy, based on a measure of potential market size, which is driven only by changes in the Chinese income distribution. This measure is exogenous to changes in prices and qualities of durable goods and is a valid instrument for expected future market size. Our results indicate that an increase in market size by one percent leads to an increase in firm-specific total factor productivity by 0.46 percent and an increase in labor productivity by 0:50 percent. These findings are robust to controlling for export behavior of firms and supply side drivers of R&D.

Abstract

This paper investigates the effct of domestic market size on innovation activities across different durable good industries in the Chinese manufacturing sector. We address the endogeneity of market size by an IV strategy, based on a measure of potential market size, which is driven only by changes in the Chinese income distribution. This measure is exogenous to changes in prices and qualities of durable goods and is a valid instrument for expected future market size. Our results indicate that an increase in market size by one percent leads to an increase in firm-specific total factor productivity by 0.46 percent and an increase in labor productivity by 0:50 percent. These findings are robust to controlling for export behavior of firms and supply side drivers of R&D.

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2 citations in Microsoft Academic

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D31, L11, L68, O31, O33
Uncontrolled Keywords:China, Demand-Induced Innovation, Directed Technical Change, Durable Goods, Economic Growth, Engel Curves, Market Size, Middle Class, Non-homothetic Preferences
Language:English
Date:January 2018
Deposited On:02 Feb 2018 10:31
Last Modified:31 Jul 2018 04:02
Series Name:Working paper series / Department of Economics
Number of Pages:32
ISSN:1664-7041
OA Status:Green
Official URL:http://www.econ.uzh.ch/static/wp/econwp277.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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