Demand forces of technical change: Evidence from the Chinese manufacturing industry

Arbeitspapier

This paper investigates the effect 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 277

Classification and Topics

• Classification: Wirtschaft ; Personal Income, Wealth, and Their Distributions ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Appliances; Furniture; Other Consumer Durables ; Innovation and Invention: Processes and Incentives ; Technological Change: Choices and Consequences; Diffusion Processes
• Subject: China ; Demand-Induced Innovation ; Directed Technical Change ; Durable Goods ; Economic Growth ; Engel Curves ; Market Size ; Middle Class ; Non-homothetic Preferences

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Beerli, Andreas ; Weiss, Franziska J. ; Zilibotti, Fabrizio ; Zweimüller, Josef
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2018

Further information

• DOI: doi:10.5167/uzh-147789
• Handle: http://hdl.handle.net/10419/192887
• Last update: 10.03.2025, 11:43 AM CET