Travis Ng

The value of superstitions

Abstract This paper estimates the value of superstitions by studying the auctions of vehicle license plates. We show that the value of superstitions is economically significant, which justifies their persistence in human civilization. We also document the changes of the value of superstitions across different types of plates, across different policy regimes, and across different macroeconomic environments. Interestingly, some of the changes are rather consistent with economic intuition.

Import Competition and Skill Content in U.S. Manufacturing Industries

Skill content varies enormously across industries and over time. This paper shows that import competition can explain a significant portion of the variation in various skill measures across manufacturing industries. Industries that face more intense import competition employ more nonroutine skill sets, including cognitive, interpersonal, and manual skills, and fewer cognitive routine skills. In addition, we find that the impact of import competition on skills is not driven by imports from low-wage countries or from China. A number of robustness checks also suggest that our results are unlikely to be driven by econometric problems.

Outsourcing, Product Quality and Contract Enforcement

Does outsourcing compromise product quality? Does sound contract enforcement alleviate this concern? We offer a simple model to illustrate how outsourcing leads to lower product quality and how contract enforcement helps mitigate this problem. These theoretical predictions are borne out of a survey of 2,400 firms in China conducted by the World Bank in 2003.

Does Trade Credit Boost Firm Performance

Some firms have achieved good performance in developing countries where the financial sector is far from established. One explanation in the literature is that these firms benefit from trade credit, a form of informal financing. Using a survey of firms in China conducted by the World Bank in early 2003, this article examines whether trade credit indeed boosts firm performance. Our ordinary least squares results show that trade credit is significantly and positively correlated with firm performance. However, using the instrumental variable approach to address endogeneity, we find that the statistical significance disappears. The results are robust to a series of robustness checks, casting doubt on the claim that trade credit boosts firm performance.

What determines the price of a racing horse

This article uses the data of 10 auctions from the two largest Australian auction houses to study how a racing horse is priced. We ask whether bloodline is indeed a determining factor. We find that the track record of its parents and siblings are important factors in determining the price of a yearling. Moreover, more mature horses and those purchased by foreign buyers are generally more expensive. We also show that racing horses sold in the flagship auctions are associated with a significant premium.

Information acquisition and institutions: An organizational perspective

Using a World Bank survey of Chinese firms, I construct a set of measures to capture the extent to which a firm involves outsiders in information acquisition. I find that firms that outsource more are not more likely to involve outsiders in acquiring information. Weakening contracting institutions raises the difficulty of safeguarding information leakage, more so when a firm involves outsiders in information acquisition than when no outsiders are involved. I test this prediction and find that firms under weaker contracting institutions are significantly less likely to involve outsiders in information acquisition.

Global Effects of U.S. Dividend Income Tax

Do non-U.S. firms respond to the dividend income tax U.S. investors pay to the IRS? The answer depends on the behavior and influence of U.S. investors in the foreign stock markets, and the underlying mechanisms may be different from those for U.S. firms. Using the 2003 dividend tax cut, which only applies to certain non-U.S. firms depending on both tax treaties and corresponding foreign withholding taxes, we find that 1) foreign firms from which U.S. investors enjoy the full tax cut become more likely to initiate or increase their dividends; 2) such changes are stronger across those foreign firms that are bigger, index-included and with higher credit rating; and 3) these firms also respond consistently to the expiry of the tax cut.

Shipping the Good Horses Out

The Alchian-Allen (1964) effect states that when a fixed per-unit cost is added to two substitutes, the more expensive (higher quality) one becomes relatively cheaper, and, thus, its consumption will increase. When applied to trade in vertically-differentiated goods, the importing regions demand relatively more high-quality goods. We examine how this result changes when the importing region is also endowed with the goods. We use a vertically-differentiated goods model with heterogeneous consumers in which prices are endogenously determined. We show that the importing regions with an endowment have a stronger Alchian-Allen effect than the regions that are not endowed. We use the auction data of Australian thoroughbred yearlings to empirically test our model and find consistent empirical patterns.

Diversity and scale effects

A larger economy is usually more diverse. To the extent that a more diverse economy requires more human capital, the economy takes more real resources away from growing itself into accumulating human capital. Scale effects – that a larger economy grows faster – may be compromised. This idea is formalized in an expanding variety growth model in which individual labour chooses his own human capital endogenously. We show that whether a larger population results in faster growth depends on the way how diversity affects the human capital requirement.

Foreign Ownership and Firm Productivity: Causality and Channels

Using data from a survey conducted by the World Bank in China, this paper shows that foreign ownership enhances firm productivity. We also find that only equity ownership from foreign firms can have such a positive impact, but not ownership from foreign institutional investors, banks, or individuals. Among the many possible channels, we find that the increased likelihood of trading with the rest of the world, transfer of technology, managerial skills and products are the potential channels through which foreign ownership exerts a positive impact on firm productivity.