Essays on the Role of Knowledge in Recent Chinese Development

Chapter 1: Earlier studies have consistently found evidence for productivity externalities of FDI through backward linkages. However, most studies do not use direct measures of backward linkages, nor do they further investigate what exactly generates these productivity externalities. Using a unique dataset from the Chinese automotive industry, which provides direct supply linkage measures, this study shows that compared with suppliers that only sell to domestic brands, the total factor productivity premium is about 16.7 percent for auto parts suppliers that sell to at least one foreign brand. Employing difference-in-differences estimation, a causal link from backward linkages to the suppliers' productivity growth is also established. Specifically, auto parts suppliers' productivity grows by 25.5 percent in the first year after formal supply relationships are forged with foreign joint venture automakers, and productivity continues to grow at least over the next two years. The case study further identifies knowledge transfer from joint venture automakers as an important source of productivity gains in local suppliers. It also offers three caveats that need to be taken into account when interpreting the observed productivity externalities in the econometric analyses. Chapter 2: Intellectual property piracy is widely believed, by authorities in both U.S. industry and government, to be rampant in China. Because we lack evidence on the rate at which unpaid consumption displaces paid consumption, we know little about the size of the effect of pirate consumption on the volume of paid consumption. We provide direct evidence on both the volume of unpaid consumption and the rate of sales displacement for movies in China using two surveys administered in late 2008 and mid-2009. First, using a survey of Chinese college students' movie consumption and an empirical approach parallel to a similar recent study of U.S. college students, we find that three quarters of movie consumption is unpaid and that each instance of unpaid consumption displaces 0.14 paid consumption instances. Second, a survey of online Chinese consumers reveals similar patterns of paid and unpaid movie consumption but a displacement rate of roughly zero. We speculate on the small displacement rate finding relative to most of the piracy literature. Degree Type Dissertation Degree Name Doctor of Philosophy (PhD) Graduate Group Applied Economics First Advisor Howard Pack