Latest Research Publications

We develop a quantitative spatial equilibrium model with endogenous migration and remittance decisions within households to examine the joint effect of migration and remittances on economic development. We apply the model to internal migration in China. Counterfactual analysis of the calibrated model shows that the presence of remittances increases migration and welfare, reduces regional inequality and facilitates structural change. Compared to a conventional single-person migration model, our household model suggests a larger reduction in regional inequality and stronger reallocation of employment from agriculture to manufacturing and services in response to the decline in migration costs over the period of 2000 to 2010.

We quantify the effects of changes in international input–output linkages on the nature of business cycles. We build a multi-country international business cycle model with manufacturing and non-manufacturing sectors that matches the input–output structure within and across countries. We find that, in our 23-country sample, changes in the international input–output linkages between 1970 and 2007 have led to a drop in output volatility in all countries, explaining up to a half of the drop in output volatility in a median country observed in the data. In the model, stronger international linkages tend to stabilize output in response to domestic shocks, and destabilize for foreign shocks. Since foreign shocks still play a modest role in driving domestic business cycles, the stabilization effects dominate. Nevertheless, changing international linkages have generated larger shock transmission across countries, increasing the risk of a global recession.

Faced with uncertainty when choosing among a wide range of similar competing technologies, users often take a herding in technology adoption (HTA) strategy to make heuristic adoption decisions. The HTA strategy brings users cost and time savings and casts doubt on user staying power. The extant adoption research has long focused on user satisfaction with the performance of the chosen technology (also known as the expectation-disconfirmation theory perspective) but does not sufficiently account for the consideration of the decision process across competing alternatives. To fill this void, this research uses a holistic post-adoptive evaluation by introducing a regret perspective in relation to competing technologies. Specifically, we theorize and operationalize a new multidimensional construct of post-adoption regret and construct a research model to examine how HTA leads to post-adoption regret and how such regret influences user staying power. The results suggest that post-adoption regret is formed primarily through two routes, outcome and process, and it is found to be more related to user switching, whereas satisfaction is related to user retention. The research model is supported by two longitudinal field studies of users in Asia and Europe who chose between competing technologies in both forms of free software and paid hardware. Findings from this research have significant implications for information systems research and industry practice.

We show that managerial learning from stock prices can lead to feedback loop vulnerability: corrective actions based on perceived negative market signals reduce the sensitivity of asset payoffs to stock market information. Less sensitivity discourages liquidity provision and increases the price impact of liquidity shocks. Interestingly, overconfident managers who disregard stock price information may be less vulnerable to the adverse price impact of nonfundamental liquidity shocks. Our empirical evidence strongly supports the model’s underlying premises and predictions: First, investment decisions of overconfident CEOs are significantly less responsive to stock price fluctuations. Second, the price impact of liquidity shocks, for example, mutual fund fire sales, is substantially smaller for firms with overconfident CEOs.

We examine whether the Environmental Protection Agency (EPA) uniformly enforces the Clean Air Act for politically connected and unconnected firms using a close election setting. We find no difference in regulated pollutant emissions or EPA investigations between the two groups, although connected firms experience less regulatory enforcement and lower penalties. These results are more pronounced for firms connected to politicians capable of influencing regulatory bureaucrats and for connected firms that are more important to their supported politicians. Taken together, our results show that campaign contributions can indirectly benefit firms by way of reduced environmental regulatory enforcement and penalties.

Publishers face an existential threat from a variety of news aggregators, such as free aggregators (e.g., Google News, Yahoo News), micropayment-facilitating aggregators (e.g., Blendle), and subscription-charging aggregators (e.g., Apple News+). The authors seek to theoretically examine whether publishers can collaborate and compete with the different types of news aggregators and, if so, what pricing and content-sharing strategies publishers should pursue. In the absence of a news aggregator, publishers sell their content as a composite publication; this intensifies interpublisher price competition and hurts publishers’ profits. A free aggregator, however, could help unbundle the articles of a publisher. Moreover, if publishers share articles on the same topic with a free aggregator, they can completely eliminate interpublisher competition and replace it with competition between the aggregator and the publishers, but they only partially eliminate interpublisher competition if they share articles on different topics with it. Yet, the free aggregator needs to bring sufficient additional traffic to the publishers to motivate them to share content and collaborate with it. Conversely, publishers will be willing to collaborate with a micropayment-facilitating aggregator even if it does not bring additional traffic to the publishers. This is because a micropayment-facilitating aggregator helps publishers unbundle their content and price discriminate. Lastly, publishers can be motivated to collaborate even with a subscription-charging aggregator that is powerful enough to dictate the terms of the revenue-sharing arrangement with the publishers. This is because the subscription-charging aggregator improves its profits without hurting the publishers’ surplus.

In a tax—public goods reciprocity framework between citizens and the state, managers view taxes as a payment to the government in exchange for public goods, and hence they adjust their willingness to pay taxes as public good quality changes. We show that corporate tax planning intensity increases with ground-level ozone pollution. Revisions in ozone pollution regulations cause counties that failed the revised and more stringent standards to reduce ozone pollution. Consequently, firms headquartered in these counties reduced corporate tax planning intensity relative to firms in other counties. The ozone-tax link varies in the predicted directions with public attention to pollution, potential welfare loss due to ozone, managers’ stakeholder orientation, taxpayers’ polluting status, political preferences, and civic norms. We also find consistent results for Superfund cleanups of hazardous waste sites. Our research sheds light on reciprocity as a potential mechanism influencing corporate tax compliance.

Using a long panel data set on Japanese firms, we find that firms make more precise forecasts and less autocorrelated forecast errors as they gain more experience. Then, we build a firm dynamics model where firms gradually learn about their demand by using a noisy signal. Using expectations data over time, we cleanly isolate the learning mechanism from other mechanisms and find that it accounts for 20%–40% of the overall decline in forecast errors over the life cycle. Productivity gains from removing information frictions range from 3% to 12%, with firm entry and exit playing prominent roles.

Using micro-level data, we examine the behavior of socially responsible investment (SRI) funds. SRI funds select firms with lower pollution, more board diversity, higher employee satisfaction, and better workplace safety. Yet, both in the cross-section and using an exogenous shock to SRI capital, we find that SRI funds do not significantly change firm behavior. Moreover, we find little evidence that they try to impact firm behavior using shareholder proposals. Our results suggest that SRI funds are not greenwashing, but they are impact washing; they invest in a portfolio of firms with better environmental and social conduct but do not follow through on their promise of impact.