Intensive Margin Research Articles

Learning by exporting: Evidence from patent citations in China

Using matched firm-level data on operations, trade, and patents in China, we empirically investigate the impact of exporting on firms’ innovation and learning from destinations. We first show that access to export markets improves both the quantity and quality of innovation. We then construct a measure of knowledge flows based on Chinese patent citation data and demonstrate that there are actual knowledge transfers from destination markets to exporting firms, which help firms improve their innovation. These findings support the learning-by-exporting effect. Moreover, we show that this learning effect remains significant and unchanged, even after controlling for the spillover effect of FDI. To investigate how the learning process occurs, we also explore whether the learning-by-exporting effect varies with different export products or export modes. We find that vertical linkages and direct exporting facilitate Chinese firms’ learning from destination markets. Finally, we show that the learning effect is particularly salient at the extensive margin compared to the intensive margin.

Personalizing or reminding? How to better incentivize savings among underbanked individuals

We use a large-scale randomized control trial to evaluate information interventions to motivate savings in a mostly unbanked population. We find positive impacts of personalized SMSs on savings during the messaging period and larger than existing studies. However, they fade away after messaging stops, like in other experiments. Compared to the existing literature, we can better identify the sources of that effect. Personalized SMSs are not more likely to be received or more memorable. Highlighting a specific monetary goal appears to be more effective than tangibility. Also, salience or personalization separately do little to increase the intensive margin of savings. Heterogeneous effects are consistent with limited attention co-existing with other behavioral biases; for groups where reactance and frustration play a role, those are overcome only when personalized SMSs are employed.

Land as a binding constraint to cluster-based development in Ethiopia: To cluster or not to cluster?

As one of the agglomeration models targeting cluster-based rural development, cluster farming has been promoted in Ethiopia and it is already reported to have significant welfare implications, but participation rates are not as high as expected. This study examines the role of land as a constraint to the development of cluster-based development in Ethiopia both using extensive and intensive measures of cluster farming. The study further disaggregates farm households based on their farm size to better understand potential heterogeneities in the relationship between farm size and cluster farming. The paper also documents other household socio-economic and network characteristics that may matter in cluster farming. We use a large-scale farm household data from 3,969 households coupled with some expert insights on cluster farming in Ethiopia. Households in the study areas grow major staples such as maize, wheat, teff, malt barley, and sesame in four main regions of Ethiopia. We employ a double hurdle model to examine both the decision to participate and the extent to which households participate in cluster farming. By extent of participation, we refer to the amount of land and share of land farm households contribute to cluster farming. For robustness purposes, we also estimate the Tobit and Linear Probability Models. We show a positive association between farm size and cluster farming both at the extensive and intensive margins. This relationship turns negative for large amounts of land. This shows that cluster farming increases with farm size up to a threshold beyond which it declines. We also find suggestive evidence that participation rates are lower for small-scale farms, but also declines for large-scale farms. In addition, we show that access to information and network characteristics also matter in enabling cluster farming. The findings of this study are relevant in the framework of plans to upscale the cluster-based development initiative in Ethiopia. Attention to landholding issues is key and may be an important area where policy action can be geared to boost cluster farming. Moreover, our results inform potential targeting plans that aim to increase the participation of small-scale farmers who are usually the intended targets of such programs.

The effect of maximum residue limit standards on China's agri‐food exports: A health perspective

AbstractThis paper investigates the impact of maximum residue limit (MRL) standards of 2692 chemical substances regulated by 44 importing countries on China's agri‐food exports, disaggregated at HS 8‐digit product level over 2005–2021. We find that MRL standards for health‐threatening chemical substances facilitate China's exports of agri‐food products, while low‐hazard MRLs impede trade. Furthermore, stricter MRL standards for health‐threatening substances reduce the probability of exporting (extensive margin) while generating larger export values conditional on exporting (intensive margin). We also identify that the adjustments of fixed and variable compliance costs resulting from changes in health‐threatening and low‐hazard MRLs contribute to the heterogeneous responses on the extensive and intensive margins of exports.

Gender specific distortions, entrepreneurship and misallocation

Women account for a small share of all business owners and a small share of the market in India's manufacturing sector. To account for these patterns, I estimate the extent of gender-specific distortions to operating a business using firm-level data. Feeding these estimates that differ across gender into a standard framework of heterogeneous producers replicates key features of the firm size distribution, on aggregate and across gender. While women face high entry barriers into entrepreneurship, they have modest impacts on female market shares when there are sharp differences in distortions across gender along the intensive margin of entrepreneurship. Policies that promote female entrepreneurship are effective, yet have only modest impacts on aggregate productivity. These findings are not unique to India, and apply across a broader set of countries.

Heterogeneity in the effects of uncertainty shocks on labor market dynamics and extensive vs. intensive margins of adjustment

The real option value theory posits that non-convex adjustment costs pertaining to a firm's input are central to comprehending the consequences of increased uncertainty. This paper leverages the diversity observed at both sectoral and country levels in the degree of irreversibility associated with hiring and firing, a critical factor generating what is commonly referred to as “wait-and-see” behavior in times of heightened uncertainty. Our empirical findings reveal two key insights. First, in alignment with the concept of second-moment shocks, uncertainty shocks predominantly influence the labor market through the extensive margin rather than the intensive margin. Second, the effects of uncertainty shocks exhibit pronounced heterogeneity across countries and industries, and the adverse employment effects (extensive margin) are amplified in a country with strict employment protection or in an industry characterized by a higher natural layoff rate, consistent with the real option theory.

Comparing GPs according to their model of practice: are multiprofessional group practices associated with more favourable working conditions?

In the generalized context of general practitioner shortages and transitions towards team-based primary care, we investigated how the different practising models relate to general practitioners' labour supply. More precisely, we analysed the association between practice models-solo, groups of general practitioners, and multiprofessional groups-and their reported labour supply and level of satisfaction with work-life balance. We used a French cross-sectional survey from 2018 that surveyed a representative national sample of 3,032 self-employed general practitioners about their working conditions. We found that the model of practice was significantly associated with differences in physician labour supply at the intensive margin and that group practice appeared to be positively associated with general practitioners' reported satisfaction with work-life balance. In terms of weekly working time, only practice in groups of general practitioners was associated with a significantly lower labour supply. However, general practitioners in groups-whether groups of general practitioners or multiprofessional groups-reported more annual leave and seemed more willing to diversify their activity by devoting more time to secondary activities, including salaried activities. Consistently, general practitioners working in groups were also more likely than solo practitioners to report being satisfied with their work-life balance. Although group practice, whether multiprofessionnal or not, seems to be well suited to meeting the new aspirations of general practitioners, those working in multiprofessional groups are associated with a higher level of weekly work supply, which might justify special attention from the public authorities.

Does target-based performance evaluation system reduce pollution emissions? Firm-level evidence from China

This paper sheds light on the effectiveness of a concrete target-based performance evaluation system (TPES) for localities in enhancing local environmental enforcement in China. We conduct a difference-in-differences (DID) specification and exploit unique firm-level data to investigate the effects of the TPES on SO2 emission reduction through the Two control Zones (TCZ) policy. The results suggest that the TPES significantly reduces SO2 emissions of firms located at the TCZ cities, both in extensive and intensive margins. We also find that the treatment effects vary largely across enterprise sizes, ownership types, and local economic development. Our findings further verify how the long-standing distortions in the decentralized implementation of nationwide environmental regulations in China are remedied with a proper performance evaluation system.

“Blood-transfusion” or “blood-making”: the impact of public transfer payment on labour supply

ABSTRACT Leveraging the ‘blood-making’ function of public transfer payments and stimulating the endogenous motivation of beneficiaries are key focus for poverty alleviation worldwide. Based on the data from 2014–2018 China Family Panel Studies (CFPS) and machine learning algorithms, this article comprehensively evaluate the effect of Chinese public transfer payment system on labour supply. We find that public transfer payments oriented households increase the labour supply of family members. Decomposing the comprehensive effect, public transfer payments increase the employment probability at the extensive margin and extend the working hours at the intensive margin. Mechanism analysis indicates that public transfer payments is conducive to enhance health capital, promote labour skill training, and relax constraints on infant and child care, thus improving labour supply. Furthermore, groups in female, young, and education below high school show a higher incentive effect for labour supply.

Personal Bests and Gender

Abstract We connect two large bodies of scientific inquiry. First, important theories in the social sciences establish that human preferences are reference-dependent. Second, a separate field of research documents substantial differences in preferences and attitudes across genders. Specifically, we examine the universe of official classic chess games (more than 250,000 subjects and 22 million games). This allows us to study differences across genders both in cognitive performance (intensive margin) and in competitive participation (extensive margin), using the fact that personal bests act as reference points. We find that males and females behave very differently around their personal bests in both margins.

Digital payments

Abstract Despite the rapid growth in digital payments (DP) adoption and its positive socio-economic impacts in low-income countries, a large portion of the population remains disconnected from DP. At the same time, usage of DP conditional on adoption is low, highlighting the unexplored potential for financial inclusion and economic advancement. This paper reviews the burgeoning academic literature on DP and categorizes both macro-level adoption barriers (extensive margin) and micro-level usage challenges (intensive margin). We draw on the Transaction Cost Index, a new comprehensive database encompassing 16 low-income countries, to shed light on major themes in markets for DP. We conclude by outlining potential avenues for future research in this area.

Destination country’s institutional quality and Chinese E-commerce exports

This paper constructs a unique dataset of Chinese firm-level bilateral cross-border e-commerce exports using the back-end online logistics database of a famous Chinese logistics platform to study the impact of destination country’s institutional quality on Chinese cross-border e-commerce export. Our results show that the institutional quality of destination countries significantly boosts China’s cross-border e-commerce exports. Institutional quality has a more significant effect on the extensive margin than the intensive margin. Mechanism analysis shows that institutional quality significantly stimulates export entry, export survival, and continuous exports. Furthermore, destination country’s institutional quality has a greater impact on cross-border e-commerce export than on traditional export.

Family ownership, finance for innovation, and exports. Evidence from European micro and small firms

ABSTRACT This study focuses on the impact of ownership and the finance for innovation on the exports of micro and small family-owned firms (FFs) compared with nonfamily-owned firms (non-FFs) for 11 European Union countries from 2014 to 2020. The motivation for the study lies in the fact that when combining ownership and innovation, the net effect on exports is not always predictable. Although family ownership negatively affects exports, the gains from innovation are significantly higher for non-FFs than FFs when studying the extensive margin of exports. This implies that the innovation effect is not sufficient to close the export gap for FFs. Regarding the intensive margin of exports, the magnitude of the innovation effect does not differ by firm-type. Thus, FFs show a low intensive margin just because of their ownership. The results hold for different model specifications and individual countries.

Political polarization in financial news

Comparing coverage of the same corporate financial news by the conservative Wall Street Journal and the liberal New York Times, we find strong evidence of political polarization in their reporting on both the intensive and extensive margins of coverage. We show that this politics-induced disagreement in corporate financial news leads to an increase in abnormal trading volume for the most politically extreme firms. Our results highlight a new source of investor disagreement, arising out of polarized reporting of corporate financial news, that generates trade among investors.

Part-time employment opportunities and labour supply of older workers

I investigate the links between the part-time employment opportunities and the labour supply adjustments of older workers, focusing on both the extensive and intensive margins. Utilising data for 30 European countries in the period from 2011 to 2021, I construct a quasi-panel that compares individuals aged 60–64 with those aged 55–59 from five years prior. I find that the employees in sectors offering more part-time jobs are more likely to stay in employment, and that the total hours worked by these employees decrease at a slower rate than those of the employees in sectors imposing more rigid hours constraints. These results are most pronounced for women in manual types of occupation, but are significant across almost all examined worker categories. The positive relationship between the part-time employment opportunities and the total hours worked of older employees is robust to various modifications in the empirical setup. However, this relationship is heterogeneous across countries, and is least pronounced in the countries with a high availability of part-time jobs.

Intensive and Extensive Margins of Labor Supply in HANK: Aggregate and Disaggregate Implications

AbstractThis paper studies how adjustment along intensive and extensive margins of labor supply affects aggregate and disaggregate effects of monetary policy. To this end, I develop a heterogeneous‐agent New Keynesian (HANK) economy where a nonlinear mapping from hours worked into labor services generates operative adjustment along intensive and extensive margins of labor supply. I find that monetary policy has significantly different effects on earnings inequality, depending on the extent to which margin is dominant, even if it generates similar aggregate responses.

Adaptive Estimation and Uniform Confidence Bands for Nonparametric Structural Functions and Elasticities

Abstract We introduce two data-driven procedures for optimal estimation and inference in nonparametric models using instrumental variables. The first is a data-driven choice of sieve dimension for a popular class of sieve two-stage least-squares estimators. When implemented with this choice, estimators of both the structural function h0 and its derivatives (such as elasticities) converge at the fastest possible (i.e. minimax) rates in sup-norm. The second is for constructing uniform confidence bands (UCBs) for h0 and its derivatives. Our UCBs guarantee coverage over a generic class of data-generating processes and contract at the minimax rate, possibly up to a logarithmic factor. As such, our UCBs are asymptotically more efficient than UCBs based on the usual approach of undersmoothing. As an application, we estimate the elasticity of the intensive margin of firm exports in a monopolistic competition model of international trade. Simulations illustrate the good performance of our procedures in empirically calibrated designs. Our results provide evidence against common parameterizations of the distribution of unobserved firm heterogeneity.

Crisis averted: Cross‐market reallocation during the great trade collapse

AbstractThis article investigates cross‐market reallocation of trade to mitigate negative effects of large economic shocks. We propose a simple measure of trade reallocation and apply it to Norwegian exports during the great trade collapse following the financial crisis in 2008–2009. The results indicate statistically significant cross‐market reallocation of trade away from markets hit hard by the crisis as measured by GDP/growth. Norwegian exports declined by 16.9% from 2008 and 2009. Without reallocation, the decline would have been between 1.6 and 3.8 percentage points greater. Successful reallocation at the firm level is done primarily along the intensive margin, by shifting physical products towards less affected markets within their pre‐crisis trade networks.

Job polarization and non-standard work: Evidence from France

Using annual and quarterly data from the French LFS, we investigate the interplay between the extensive and intensive margins of labor adjustment, job polarization, and non-standard work (NS) along the business cycle. We find that the declines in aggregate work hours during economic downturns can primarily be attributed to the reduction in routine standard employment (R,S) during past recessions in France. We then study the dynamics of routine standard employment, highlighting several key findings: (i) The primary drivers of R,S employment are inflows from routine non-standard work (R,NS) and unemployment. (ii) Individuals who lose R,S jobs are more likely to transition to R,NS positions following a brief period of unemployment. (iii) A majority of transitions within this employment category occur within the same employer, resulting in asymmetric adjustments in individual working hours. This often involves a notable increase in hours following either a contractual upgrade or a change in employer. Finally, we draw a comparative analysis between these findings and the United States, where the dynamics of routine employment appear distinct, despite a similar trend in job polarization.

Loan guarantees in a crisis: An antidote to a credit crunch?

Credit contractions are costly, but policymakers have limited tools to counter them. In this paper, we examine the efficacy of public credit guarantees as antidotes to a credit crunch by studying the Paycheck Protection Program (PPP). We find that the program averted a historic credit crunch at a time when banks were unlikely to meet firm credit needs by risking their own capital. Our evaluation incorporates selection effects emanating from banks’ participation decision on both the extensive and intensive margins. Risk-aversion, rather than profitability, motivated bank participation in the program. Indeed, even as the program boosted loan growth among participants, it attenuated profitability.