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Essays on firms, technology, and macroeconomics

Gao, Xijie (2020) Essays on firms, technology, and macroeconomics. PhD thesis, London School of Economics and Political Science.

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Identification Number: 10.21953/lse.00004180


This thesis consists of three chapters. Chapter 1 studies the role of marketing in the economy. Using aggregate and firm-level data, I find that aggregate marketing intensity in the US increased sharply around the mid-1990s, which coincides with a rapid rise of elasticity between firm-level Marketing Production Cost Ratio and markup. To explain these facts, I develop a model with heterogeneous firms and endogenous markups in which firms engage in marketing to signal their quality. I use a calibrated version of the model to quantify the impact of information frictions and marketing on aggregate productivity. I find that quality information revealed by marketing is valuable and access to marketing cannot undo the information frictions completely. Chapter 2 examines the impact of zombie firms on resource allocation. Using firm-level data in China, I show that zombie firms are larger, less productive, and receive a higher subsidy rate on average. The difference in average subsidy rate between zombies and non-zombies reflects both the selection criterion of zombies and the underlying joint distribution of subsidy rate and productivity. I develop a model with heterogeneous firms to quantify the impact of zombies on aggregate productivity. Quantitative exercise shows that reducing the dispersion in subsidy rate across firms can lead to significant productivity gains, while policies that increase the exit rate of zombies have limited productivity effects. Chapter 3 establishes two facts along with the rise of information technology: (i) the output from the information sector is more intensively used as an intermediate input; (ii) the wage of information workers and their total employment increase relative to those of non-information workers. To understand the causes, we develop a two-sector accounting framework with sector-factor specific technical changes. We find that labor-augmenting technical change is important in explaining the observed change in wage premium and intermediate shares.

Item Type: Thesis (PhD)
Additional Information: © 2020 Xijie Gao
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
T Technology > T Technology (General)
Sets: Departments > Economics
Supervisor: Ngai, Rachel

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