Research

Taxes on business revenue fall on every intermediate transaction, like tariffs inside the production network. I measure their cost using a large reform that replaced a turnover tax with a value-added tax in China’s services. Entry and revenue in treated sectors rise by a fifth, trade involving services by a third, and manufacturers move service tasks to the market. A spatial production-network model with an endogenous make-or-buy margin implies a 1.3 percent gain in real income, 29 percent through that margin. At equal revenue, a value-added tax delivers 1.4 to 2 percent more real income than a turnover tax.

Many countries heavily rely on commodities for their production and exports, rendering them susceptible to fluctuations in global commodity prices. This paper investigates the impact of exogenous commodity price shocks on the domestic credit market, with a particular focus on credit allocation across firms. Using detailed credit registry data from Brazil and leveraging regional and bank-level variation in commodity exposure, we find that commodity price booms enhance domestic financial conditions, leading to an expansion in bank lending and improved credit conditions. This expansion is accompanied by considerable spillovers both across and within sectors, with significant improvement in credit conditions concentrated in the nontradable sector, and among smaller firms. We explore the potential channels driving these patterns and discuss broader macroeconomic implications.

We examine how foreign aid shapes urban development in Sub-Saharan Africa at the very local level. Using data on 1,643 georeferenced Chinese aid projects, we analyze the effect of aid on the evolution of built surface and volume on 100-meter grids within a 2-kilometer radius microregion. Our staggered difference-in-differences approach reveals that foreign aid projects significantly increase local urbanization, with the effects decreasing with distance from the projects. Treatment effects are mostly driven by residential development, particularly in previously underdeveloped areas. Our findings contribute to the understanding of the consequences of foreign aid on urban transformations in the developing world.

How do natural advantages shape regional industrial growth? We study a large, plausibly exogenous supply shock, the 1892 discovery of the Mesabi Iron Range, which supplied the majority of the nation's iron ore within a decade, to examine how abundant, cheap access to a primary input reshaped the growth and geography of American heavy industry. Using newly digitized establishment-level directories covering every blast furnace, rolling mill, and steel works in the United States from 1880 to 1916, linked to county employment from the decennial censuses, we show that counties with one standard deviation better access to Mesabi ore added roughly 20,000 tons of furnace capacity by 1916. The industry visibly relocated: furnace sites at old ore banks and coalfields were abandoned, while capacity concentrated at lake ports and low-cost assembly corridors. We also find substantial employment gains both in iron and steel and in related downstream industries. Altogether, these results suggest that resource abundance combined with cheap Great Lakes transport substantially shaped the economic geography and growth of American industry.

This paper examines regional heterogeneity in the transmission of China’s monetary policy using Local Projections with province-level panel data and an externally identified M2 shock series from Chen et al. (2018). The economically advanced East (coastal) region exhibits significantly weaker output and price responses to monetary policy shocks than inland provinces: three years after an expansionary shock, output in the East has not responded at all. I trace the price differential to trade openness, which accounts for roughly 70–80% of the East/non-East CPI gap. Inter-regional input-output tables show that the attenuation works mainly through imported inputs used by firms, whose costs are pinned to world prices under the managed exchange rate, rather than through imported consumer goods alone. Trade openness explains less than half of the output differential. Land transaction data point to local fiscal behavior as the remaining channel: after an expansionary shock, land-scarce Eastern governments cut land supply and land revenue more than inland governments, with no corresponding rise in land prices, consistent with eased fiscal pressure rather than price substitution.

How do green industrial policies reshape the balance between environmental protection and industrial competitiveness in developing economies? We study the spatial effects of a green industrial policy in a major developing economy—China—by examining China's national ban on waste imports implemented in 2013 ("Operation Green Fence") and expanded in 2017 ("National Sword"). Leveraging granular data from Chinese customs, firm-level and satellite sources, we estimate a Difference-in-Difference design that exploits the 2013 "green fence" waste trade ban and variations in prefecture-level exposure to waste trade. Firms more exposed to waste inputs experienced a 5–10 percent decline in total factor productivity and higher input costs immediately after the policy, consistent with short-run supply-chain disruptions. At the same time, these firms tripled their applications for waste-management patents and reduced pollution emissions by about 20–25 percent, indicating induced innovation and environmental benefits. Aggregating to the province level, we find that regions with greater initial exposure to waste imports experienced measurable short-run GDP declines. Motivated by the complete regime change in 2017 and to assess long-run consequences, we build a quantitative spatial general-equilibrium model with input–output linkages and pollution-productivity feedback. The model implies that the ban caused a modest welfare loss of 0.03 percent through input reallocation alone but a welfare gain of 2.37 percent once cleaner production and productivity improvements are incorporated. The findings highlight how green industrial policy can disrupt production networks in the short run yet yield long-run welfare gains through environmental quality and productivity channels.