Yingjun Su
Research Statement
Micro-level productivity studies focus on the firm level. Few have gone any deeper to assess the internal
activities of a firm. However, modern industries often involve complicated multi-process production; each
link of the value chains could differ inherently in technology. Internal configurations and performances of
each component of a firm exert important influences on the overall productivity of a firm, as is pointed out
in both economic and organizational literatures. Starting with unusual data about Chinese steel firms, and
drawing on new methods of industrial organization and estimating procedures, our research group is starting
to systematically push back the curtain of ignorance surrounding the internal dynamics of productivity
within firms.
My job market paper is part of an ongoing project with Prof. Loren Brandt and Prof. Yao Luo at the
University of Toronto, where I have spent the past year and a half, and Dr. Feitao Jiang at the Chinese
Academy of Social Sciences. We study productivity differences in vertically-integrated Chinese steel
operations, using a unique data set that provides plant-level information on material inputs and output in
physical units and plant equipment for sintering, iron-making and steel refining. We find that private
vertically-integrated units are more productive than provincial state-owned (SOEs) firms, followed by
central SOEs. This ranking lines up with our productivity estimates in the two downstream production
stages, but central SOEs outperform in sintering, most likely because of their superior access to higher
quality raw materials. The productivity differential favoring private firms declines with the size of
vertically-integrated operations, turning negative for units larger than the median. We attribute this pattern
to differences in the internal configuration of vertically-integrated units, which reflect the greater
constraints confronting expanding private sector firms. Increasing returns to scale within each stage of
production partially offset these costs, and rationalize firms' choice on larger vertically-integrated
operations.
Future Research on Steel My job market paper has set the foundation for a series of papers on my research
agenda. In my job market paper, we impose the assumption that in a vertically-integrated operation, each
production unit (i.e., equipment) operates independently both within and across stages. In an immediate
extension, we are working to relax this assumption by allowing for productivity shocks to be correlated
within and across stages. This full-fledged description of productivity goes one step further to characterize
the links of vertically-integrated firms' internal activities. We will jointly estimate production functions for
the three stages in the value chain. This extension will make an important contribution in methodology to
the production function literature.
Another project focuses on China’s industrial policy in the steel industry. Beijing has been struggling to
restructure the industry around a few giant state-owned firms through two major policy tools: capacity
reduction and M&A (merger and acquisition). One paper focuses on the Chinese central government’s
policy of cutting steel capacity by 100 million to 150 million tons in the next 5 years and look at the policy
implications for the industry. This policy scheme may result in unintended consequences. On one hand,
firms have strong incentives to expand ex-ante to remain a significant player so as to avoid being shuttered
or downsized. On the other hand, as suggested by my job market paper, the government would likely cut
private firms, which are nevertheless the most efficient segments of the industry. To understand the dynamic
implication of this policy, we will construct a dynamic structural model of firm investment on steel capacity
where SOEs and private firms expand under different borrowing/hiring/input constraints. These
constraints enter our model as different cost functions of investment, differential prices of labor and raw
materials by ownership. As to data, we are in the process of manually assembling annual firm-level
information for 2000-2013 originating from the Chinese Iron and Steel Association, whose members
account for more than 80% of China’s total steel production. Key data include output quantity and value,
steel-making capacity (capital), employees, wages, intermediate inputs and profits. With the estimated
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Yingjun Su
structural model, we will run counterfactual experiments of various capacity reduction schemes and learn
the policy impact on efficiency (i.e. productivity and profitability) of the steel industry and welfare.
In parallel to the work on the structural investment model, we also explore the impact of M&A on firm
efficiency and market power. The central government has constantly promoted (and often imposed)
consolidation during the last 15 years. We have constructed a timeline with details of annual M&A
transactions from 2000 to 2013 in the industry. A particularly nice feature of our data is that firms report
information separately for subsidiary units both before and after such reorganizations. Therefore, the inputs
and detailed disaggregated output data by final product enable us to examine firms’ performance with
regard to productivity, product mix and markups before- and after-M&A. This study will add a new
dimension to productivity studies by focusing on structures and relationships within rather than merely
across firms.
Research on Finance I use the Chinese Industrial Survey Data from 1998 to 2007 to examine financing
constraints faced by the manufacturing sector. Building on the Euler Equation approach and applying the
dynamic GMM estimation, I find that on average private firms face more obstacles in accessing credit than
state-owned firms (SOEs). Contrary to the widely accepted view that China's private sector is largely
excluded from formal credit allocation, I find that large firms, both state-owned and private, are not credit
constrained. On the other hand, medium and small SOEs are financially constrained, although to an extent
far less than their private counterparts of similar size. Moreover, the capabilities of firms in accessing
external finance also differ by economic region and across industries.
Research on International Trade My summer 2013 research consultancy at the World Bank provided an
ideal opportunity to broaden the scope of my research. To better understand potential factors that lead to
the middle-income trap, we investigate the evolution of product diversification and quality upgrading in
two groups of economies: one has stepped into the high income level (South Korea and Taiwan); the other
remains trapped at the middle income level (Argentina and Brazil). To enable across country comparison,
we utilize detailed product-level US merchandise import data from 1972-2012 to construct export variety
and quality indices. We find that South Korea and Taiwan did not exceed Brazil in export variety but
distinctly outperformed Argentina. In addition, the quality of manufacturing exports of Taiwan and South
Korea was significantly higher than Brazil and Argentina; this gap widened over 1972-1988 and remained
stable afterwards. On both variety and quality dimensions, patterns vary across sectors. Dr. Dinh and I are
now cooperating with a leading think tank in Morocco to use our empirical methodology to evaluate the
industrial upgrading process in middle- and high-income countries.
Future Research on International Trade Prof. Mengxiao Liu at Syracuse University and I have begun to
investigate the power of culture by studying the effect of South Korean dramas on Sino-Korean trade. Not
only does Korean pop culture directly generate profits through licensing and concerts, but the popularity of
its dramas and idols also indirectly stimulates the exports of Korean products. Popular Korean dramas
become hot keyword searches on various social websites and online shopping websites within weeks of
their debuts in China. To this end, we extract product-level information associated with Korean dramas by
searching the names of these dramas on China's most popular online-shopping website: Taobao. We then
relate this product information to corresponding industries to identify the changes in import-export volumes
driven by the Korean dramas.
Looking forward, I hope to continue using quantitative methods to tackle well-defined questions in
industrial organization and international trade with a particular focus on challenges related to economic
development.
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