Funding Results of CEP Small Research Grants are out. 5 grants were awarded to researches conducted related to three programs in the Center, namely Development Economics Action Research (DEAR) Program, the Antitrust and Competition Policy and the Globalization and Growth Program.

The grants are intended to support policy-relevant research that in the future can lead to dissemination and dialogue with relevant stakeholders interested in gaining a deeper understanding of economic policy issues.
 

Funding Results 2023

Affiliate Trade, Offshoring, and Multinational Innovation

Yao Amber Li, Associate Professor of Economics

Abstract

We will investigate the relationship between the affiliated firms’ participation in the global value chain through affiliate trade, offshoring decision of the parent firm and MNEs’ innovation. Affiliate trade refers to the importing and exporting  behavior of foreign affiliates of MNEs. We focus on the channels and impacts of affiliate trade and offshoring on MNE innovation, including parent company domestic innovation, affiliate innovation and MNE aggregate innovation at the global level. To achieve this goal, we have started constructing a unique and highly disaggregated database that links MNEs headquartered in Taiwan and their affiliates’ trade activities in mainland China over 17 years between 2000 and 2016. Our database will include patent application and approval information for each parent firm, affiliate firm, and non-parent firm in Taiwan. This allows us to investigate the impact of trade and offshoring decisions on firms’ innovation, which will have import implications on innovation policies.

Impact Evaluation of Seoul Safety Income (Negative Income Tax) Project

Hyuncheol Bryant Kim, Associate Professor of Economics

Abstract

Social security systems based on means-testing face several challenges such as welfare blind spots, a lack of incentive to work, and high administrative cost. Unconditional and universal cash assistance schemes have been widely studied over the past 10 years as Universal Basic Income (UBI) has risen as one of the important agenda in public policy debates. Negative income tax (NIT), in which the government pays households a certain amount to support their income levels could be considered an alternative cash transfer program to UBI. We study the effects of the Seoul Safety Income Project (SSIP), which is one of the extremely rare examples of the government’s randomized policy experiments in Asia. SSIP is a modified NIT. In collaboration with the Seoul Metropolitan Government (SGM), we are conducting a randomized controlled trial in which randomly selected households will receive a monthly income payment for three years. For randomly selected treatment households, SSIP provides monthly payments equivalent to 50% of the difference between the household’s income and 85% of the median income. We will evaluate the impact of SSIP using detailed individual and household level information on labor supply, income, assets, and health. We will have access to both administrative data and survey data throughout the five-year project period. The research team members are leading an impact evaluation as core members of the executive committee for the SSIP. We do not receive any financial support from SGM. Therefore, funding support would be critical for the timely data analysis and preparation of the manuscript.

The gravity of cross-border payments and the future of dominant currencies

Edwin L.-C. Lai, Professor of Economics

Abstract

This project is part of the investigation of currency dominance in the international monetary system. In this project, I would like to identify and quantitatively estimate the determinants of the payment shares of currencies in international interbank payments. The payment share is a measure of the degree of dominance of a currency in international payments. I will first develop a model to explain quantitatively the bilateral inter-country payments flows by currency. I will then estimate the model and calculate the payment shares of the currencies and compare with the data. Then I will carry out counterfactuals to investigate how different shocks can affect the degree of dominance of the incumbent dominant currency, the US dollar. This will shed light on a hotly debated question: “Under what condition will the US dollar’s dominance as a payment currency be substantially undermined or even replaced by other currencies such as the euro or the renminbi?”

Researcher-Entrepreneur Relationship and Performance of Innovative Startups

Yangguang Huang, Assistant Professor of Economics

Abstract

The success of innovative startups requires efforts from both researchers and entrepreneurs. We study the researcher-entrepreneur relationship and its implications for startup performance. The development of innovative technology not only generates profit from the product market but also value from creating new knowledge. The knowledge spillover from the joint venture yields positive externalities, so many governments have policies that compensate R&D activities in the form of grants, subsidies, patent license fees, etc. These policies are Pigouvian subsidies that narrow the gap between the social and private marginal benefits of innovation. We find that because the researcher has more bargaining power in the joint venture, R&D subsidies to knowledge may not increase the researcher's effort. Instead, these subsidies induce the entrepreneur to over-supply his effort, and the outcome can be worse than in the absence of compensating knowledge. Our findings offer insights into the design of a policy portfolio that fixes both external market failures and internal frictions within innovative startups. The conventional Pigouvian subsidies to innovation need to be complemented with policies on startup governance and the labor market of entrepreneurs.

Publication of Digital Innovation Patents and Formation of Patent Thickets: Evidence from the US IT Industry

Zhitao YIN, Assistant Professor of Information Systems

Abstract

This research aims to investigate the tradeoff faced by policy makers about the knowledge spillover effects arising from patent publication in digital innovation. Patent publication can promote knowledge diffusion, but can also cause the formation of patent thickets, which adversely affect the innovation ecosystem. The study will focus on the IT industry to analyze the impact of patent publication on patent thickets formed by competitors of the focal firm. Using the American Inventor's Protection Act of 2000 as an exogenous shock, the study will evaluate whether competitors use knowledge spillover from a focal firm's published patents to form patent thickets for the firm. The study will also investigate how the effect of patent disclosure on the formation of patent thickets varies based on the focal firm's market and technological positioning. This study will provide evidence for policy makers to develop competition policies to address the patent thicket issues in the IT industry and digital innovation ecosystems.