Three Essays in Economic Analyses of Firms' Performance
Urban and Regional Planning
Firms' decisions and outcomes
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AbstractMany developing countries, such as China and India, have undergone dramatic changes during the past few decades. Two topics have gained widespread attention and discussion among these changes, namely environmental protection and transportation infrastructure construction. Although a large amount of literature discusses the impacts of environmental protection and transportation infrastructure on various economic outcomes, their findings are still controversial. My thesis contributes to this literature by analyzing the effects of environmental regulation and expressway construction in China on various economic outcomes using various moderate empirical methods, big datasets, and multiple software programs. Specifically, this thesis is a collection of three essays. The first two chapters theoretically and empirically study the effects of environmental regulation on firms' international trade, product quality, productivity, markups, credit constraints, profitability, and competitiveness. The last chapter studies the effects of transportation infrastructure on exports, productivity, markups, market competition, and misallocation. Chapter 1 explores the effects of two wastewater regulations on export product quality using disaggregated level data from China. Applying a difference-in-differences approach, I find that the first regulation improves product quality by 4.8%, while the second regulation with more rigorous standards declines product quality by 9.3%. However, decomposing analysis shows that both the intensive and extensive marginal effects of the two regulations almost equally improve the product quality at the firm-year level. The positive effect of the first regulation can be attributed to advanced technology adoption, innovation enhancement, and changes in the composition of firms and products. The negative effect of the second regulation is driven by firms' exit. Although the more rigorous regulation declines firms' competitiveness, the first regulation improves firms' competitiveness despite rising production costs and declining labor demand. Credit constraints have an essential impact on firms' performance, which might explain the controversial results of the effects of environmental regulation on firms' performance, especially for developing countries with the underdevelopment of financial markets. Chapter 2 develops a new dynamic general equilibrium model studying how environmental regulation affects firms' performance by considering their credit constraints. The model predicts that stricter regulation reduces labor demand and production due to the increases in firms' production costs. However, regulation increases firms' sales revenue, profits, and productivity through a selection effect. Moreover, most of these effects decrease with firms' credit constraints. These predictions are empirically tested by exploiting a quasi-natural experiment on firms in China's textile printing and dyeing industry. In addition to the growing pollution problem in developing countries, the construction of infrastructure has also undergone dramatic changes over the past few decades, which could significantly impact firms' performances. Chapter 3 identifies how proximity to new transportation infrastructure affects exports by combining highly disaggregated data on firm exports with novel datasets on firm geolocation and the Chinese national expressway expansion from 2000 - 2013. I find that accessing the expressway network increases export amounts by 7.1%, decreases export prices by 5.2%, and has an insignificant impact on export revenues. Exploiting the Ming Dynasty Courier Road (1587) as an instrument for the expressway network suggests that the expressway network’s design is exogenous. Decomposing the effect on export amounts across firms reveals that they are driven by incumbent firms, and not entry or exit dynamics. There are several potential mechanisms driving these results, including rising firm productivity, greater market concentration, higher markups, and decreases in resource misallocation. Overall, access to expressways increases firms' competitiveness by improving firm and market efficiency. This thesis provides rich analyses of the effects of different policies on multiple economic outcomes, which deepen the understanding of the economic impacts of environmental regulation and transportation infrastructure development and has reference significance for policymakers to improve policy effectiveness.
CitationWang, L. (2022). Three Essays in Economic Analyses of Firms’ Performance (Unpublished doctoral thesis). University of Calgary, Calgary, AB.
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