Shengmao Cao

Economics Department
Stanford University
Stanford, CA 94305

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Institutional Affiliation: Stanford University

NBER Working Papers and Publications

August 2020Quid Pro Quo, Knowledge Spillover, and Industrial Quality Upgrading: Evidence from the Chinese Auto Industry
with Jie Bai, Panle Jia Barwick, Shanjun Li: w27644
While there is a vast body of research on the benefits of FDI in developing countries, whether and how the form of FDI matters have received limited attention. In this paper, we study the impact of FDI via quid pro quo (technology for market access) on facilitating knowledge spillover and quality upgrading. Our context is the Chinese automobile industry, where foreign firms are required to set up joint ventures with domestic firms in return for market access. Using a unique dataset of detailed quality measures of vehicle performance, we show that affiliated joint ventures and domestic firms share a greater similarity in quality strength compared to non-affiliated pairs. The results suggest that quid pro quo spurs additional knowledge spillover to affiliated domestic firms, in addition to a...
August 2017Local Protectionism, Market Structure, and Social Welfare: China's Automobile Market
with Panle Jia Barwick, Shanjun Li: w23678
While China has made great strides in transforming its centrally-planned economy to a market-oriented economy, there still exist widespread interregional trade barriers, such as policies and practices that protect local firms against competition from non-local firms. This study documents the presence of local protectionism and quantifies its impacts on market competition and social welfare in the context of China’s automobile market. This market exhibits a salient feature that vehicle models by joint ventures (JVs) and especially state-owned enterprises (SOEs) command much higher market shares in their headquarter province than at the national level. Through spatial discontinuity analysis at provincial borders, falsification tests, and consumer surveys, we first confirm protective policies...

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