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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Demand forces of technical change evidence from the Chinese manufacturing industry
Organization Unit
  • Andreas Beerli
  • Franziska J Weiss
  • Fabrizio Zilibotti
  • Josef Zweimüller
  • English
Institution University of Zurich
Series Name Working paper series / Department of Economics
Number 277
ISSN 1664-7041
Number of Pages 32
Date 2018
Abstract Text This paper investigates the effct of domestic market size on innovation activities across different durable good industries in the Chinese manufacturing sector. We address the endogeneity of market size by an IV strategy, based on a measure of potential market size, which is driven only by changes in the Chinese income distribution. This measure is exogenous to changes in prices and qualities of durable goods and is a valid instrument for expected future market size. Our results indicate that an increase in market size by one percent leads to an increase in firm-specific total factor productivity by 0.46 percent and an increase in labor productivity by 0:50 percent. These findings are robust to controlling for export behavior of firms and supply side drivers of R&D.
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Keywords China, Demand-Induced Innovation, Directed Technical Change, Durable Goods, Economic Growth, Engel Curves, Market Size, Middle Class, Non-homothetic Preferences, Konsumtheorie, Innovation, Gebrauchsgut, Binnenmarkt, Faktorproduktivit├Ąt, Einkommensverteilung, China