Yao Amber Li

Credit Constraints, Quality, and Export Prices: Theory and Evidence from China

This paper examines the relationship between the credit constraints faced by a firm and the unit value prices of its exports. The paper modifies Arkolakis’s (2010) model of trade with heterogeneous firms by introducing endogenous quality and credit constraints. The model predicts that tighter credit constraints faced by a firm reduce its optimal prices as its choice of lower-quality products dominates the price distortion effect resulting from credit constraints. However, a competing theory based on the alternative assumption that quality is exogenous across firms would predict completely opposite results: Prices increase as firms face tighter credit constraints. An empirical analysis using Chinese bank loans data, Chinese firm-level data from the National Bureau of Statistics of China (NBSC), and Chinese customs data strongly supports the predictions of the endogenous-quality model. Moreover, the predictions of the exogenous-quality model are supported by using quality-adjusted prices in regression analysis. In addition, we confirm the mechanism of quality adjustment: firms optimally choose to produce lower-quality products when facing tighter credit constraints.

Geography, Ties, and Knowledge Flows: Evidence from Citations in Mathematics

Using data on academic citations, career and educational histories of mathematicians, and disaggregated distance data for the worlds top 1000 math departments, we study how geography and ties affect knowledge flows among scholars. The ties we consider are coauthorship, past colocation, advisor-mediated relationships, and alma mater relationships (holding a Ph.D. from the institution where another scholar is affiliated). Logit regressions using fixed effects that control for subject similarity, article quality, and temporal lags, show linkages are strongly associated with citation. Controlling for ties generally halves the negative impact of geographic barriers on citations; the distance effect became insignificant after 2004.

Price Adjustment to Exchange Rates and Forward-looking Exporters: Evidence from USA–China Trade

This paper shows that the pricing behavior of exporting firms exhibits a “forward‐looking” nature with sticky prices. As a result, the expectations of future exchange rates affect current prices at both the product level and firm level. We find evidence by employing both highly disaggregated Harmonized System (HS) 10‐digit product‐level import data of the USA and firm–product level customs data on Chinas exports to the USA. These findings provide evidence for a previously unexplored micro‐level forward‐looking nature of trade price adjustment as response to future exchange rates, and suggest a potentially important factor in helping explain incomplete exchange rate pass‐through.

Input-Trade Liberalization and Markups

This paper presents theory and evidence from Chinese firm-product data that, given firm productivity, trade liberalization increases product markups. This finding calls for a reconsideration of the well-established imports-as-market-discipline hypothesis. This paper further verifies underlying mechanisms behind this finding: input tariff reductions decrease marginal costs, and tariff effects on markup adjustments are more profound among firms of higher import dependence. By comparing results for two trade regimes -- ordinary trade wherein firms pay import tariffs to import, and processing trade wherein firms are not subject to import tariffs -- this paper finds that the aforementioned effects only apply to ordinary trade.