Jaedo Choi

I am a Ph.D. candidate in the Joint Program in Business and Economics at the University of Michigan.


I am on the job market in 2021-2022 and available for interviews at the virtual EJME and ASSA.


Research Fields: International Economics, Macroeconomics


Address: 701 Tappan Ave, Ann Arbor, MI 48109

Telephone: +1 (734) 263-4680

E-mail: jaedohi@umich.edu

Curriculum Vitae: CV

Job Market Paper

Technology Adoption and Late Industrialization (with Younghun Shim)

Latest Draft (Latest Version: Nov 2021, Frequently updated) | Abstract

Presentations: Harvard Growth Lab, Midwest International Trade Meetings 2021, EWMES 2021, LACEA-LAMES 2021, ETSG 2021, H2D2

Abstract

We study how the adoption of foreign technology and local spillovers from such adoption contributed to late industrialization in a developing country during the postwar period. Using novel historical firm-level data for South Korea, we provide causal evidence of direct productivity gains to adopters and local productivity spillovers of the adoption. Based on these empirical findings, we develop a dynamic spatial model with firms' technology adoption decisions and local spillovers. The spillovers induce dynamic complementarity in firms' technology adoption decisions. Because of this dynamic complementarity, the model potentially features multiple steady states. Temporary adoption subsidies can have permanent effects by moving an economy to a new transition path that converges to a higher-productivity steady state. We calibrate our model to the microdata and econometric estimates. We evaluate the effects of the South Korean government policy that temporarily provided adoption subsidies to heavy manufacturing firms in the 1970s. Had no adoption subsidies been provided, South Korea would have converged to a less industrialized steady state in which the heavy manufacturing's share of GDP would have been 15% lower and aggregate welfare would have been 10% lower than the steady state with successful industrialization. Thus, temporary subsidies for technology adoption had permanent effects.

Working Papers

The Long-Term Effects of Industrial Policy (with Andrei A. Levchenko)

Latest Draft | NBER Working Paper 29263 | CEPR Discussion Paper 16534

A non-technical summary: NBER Digest, VoxEU.org

Presentation: APTS 2021

Abstract

This paper provides causal evidence of the impact of industrial policy on firms' long-term performance and quantifies industrial policy's long-term welfare effects. Using a natural experiment and unique historical data during the Heavy and Chemical Industry (HCI) Drive in South Korea, we find large and persistent effects of firm-level subsidies on firm size. Subsidized firms are larger than those never subsidized even 30 years after subsidies ended. Motivated by this empirical finding, we build a quantitative heterogeneous firm model that rationalizes these persistent effects through a combination of learning-by-doing (LBD) and financial frictions that hinder firms from internalizing LBD. The model is calibrated to firm-level micro data, and its key parameters are disciplined with the econometric estimates. Counterfactual analysis implies that the industrial policy generated larger benefits than costs. If the industrial policy had not been implemented, South Korea's welfare would have been 22-31% lower, depending on how long-lived are the productivity benefits of LBD. Between one-half and two-thirds of the total welfare difference comes from the long-term effects of the policy.

Lobbying, Trade, and Misallocation

Latest Draft, submitted

Presentations: Midwest Macroeconomics Meetings 2019, National Tax Association’s Annual Conference 2021, AFES 2021, AMES 2021, ESAM 2021

Abstract

This paper studies the impact of lobbying on resource misallocation. I develop a model of heterogeneous firms that can lobby to decrease their output tax/distortion. This lobbying effort can either magnify or mitigate a pre-lobbying level of misallocation depending on whether the more productive firms are initially more distorted. If the more productive firms are burdened by higher pre-lobbying exogenous distortions, they can lobby to overcome these distortions, which increases aggregate total factor productivity (TFP). The TFP influences of lobbying can be affected by international trade as exporters increase their lobbying expenditures due to complementarities between market size and gains from a lower tax post-lobbying. I estimate the model by reduced-form instrumental variables techniques and structurally using firm-level data. I find that lobbying can increase US TFP by 4-7% compared to a counterfactual economy with the same pattern of pre-lobbying distortions, but where lobbying is not allowed.

Internal Migration, Geography, and Large Devaluation

Preliminary Draft

Abstract

How internal migration and its frictions affect amount of sectoral reallocation and welfare changes in the aftermath of a large devaluation? Because of asymmetric expansionary effects of a devaluation on exports across sectors and differences in industrial composition across regions, regions are heterogeneously affected by a devaluation. Using regional employment and internal migration data following the 1998 Korean devaluation, I find a sizable increase in internal migration into regions whose industry composition is more export-oriented. To quantify these effects of internal migration and its frictions, I build a quantitative dynamic spatial general equilibrium model of trade and internal migration. The model is calibrated to region-sector level data. Had there been no internal migration after the devaluation, aggregate welfare would have decreased 9% more, and there would have been 4% less amount of sectoral reallocation when compared to the economy with the amounts of internal migration observed in the data. Because of the local heterogeneous exposure to the devaluation, the devaluation had large distributional effects across regions. However, internal migration mitigated these distributional effects.


Other Working Paper

Sequentially Estimating the Structural Equation by Power Transformation (with Roger H. Moon, Jin Seo Cho)

Latest Draft, submitted

Abstract

This study provides an econometric methodology to test for a linear structural relationship among economic variables. For this, we propose the so-called distance-difference (DD) test statistic and show that it has omnibus power against arbitrary nonlinear structural relationships. If the DD test statistic rejects the linear model hypothesis, a sequential testing procedure assisted by the DD test statistic can consistently estimate the degree of polynomial function that arbitrarily approximates the nonlinear structural equation. Using extensive Monte Carlo simulations, we confirm the DD test’s finite sample properties and compare its performance with the sequential testing procedure assisted by the J-test statistic and moment selection criteria. Finally, we provide an empirical illustration by investigating the structural relationship between the log wage and work experience years using Card’s (1995) National Longitudinal Survey data and affirm their inferential results by our methodology.


Research in Progress

From Imitator to Innovator: Technology Adoption and Growth (with Younghun Shim)

Social Network in Production Network (with Barthélémy Bonadio)