Working Papers

Social Externalities in Product Choice and Market Competition: Evidence from a Mobile Communication Network

Job Market Paper

This paper investigates whether and how peer influence in product choices affects product competition. Using data from the Chinese smartphone market, I find that a 10 percent increase in the share of friends using a given product doubles the average choice probability conditional on purchasing. Consumers are more likely to conform to affluent friends and choose visually distinct features, suggesting that peer influence is likely to be motivated by status-seeking. Using a structural model, I show that peer influence is especially important for the adoption of high-quality products while reducing the market share of low-quality products. Moreover, counterfactual simulations suggest that peer influence on average reduces initial prices by 0.7 percent and increases subsequent prices by 0.05 percent. The total profits of new products are about 7.03 percent higher, and the consumer surplus is increased by about 1.7 percent more compared to the case when peer influence is absent. Price reduction is pronounced for low-quality products with elastic demand. As a result, peer influence intensifies competition and provides firms an incentive to set lower initial prices to accumulate the consumer base, which can then be leveraged to enact price increases. 

Information, Mobile Communication Patterns and Social Referrals

with Panle Jia BarwickYanyan Liu and Eleonora Patacchini. R&R American Economic Review

We use the universe of de-identified and geocoded cellphone records for over a million individuals from a major Chinese telecommunication provider to examine the role of information exchange in urban labor markets. We find that information flows, as measured by call volume, correlates strongly with worker flows, a pattern that persists at different levels of geographic aggregation. Conditional on information flow, socioeconomic diversity of the social contacts, especially that associated with the working population, helps to predict the worker flows. We supplement the phone records with administrative data on firm attributes and auxiliary data on job postings and residential housing prices. Referred jobs are associated with higher monetary gains, a higher likelihood to transition from part-time to full-time, reduced commuting time, and a higher probability of entering desirable jobs. Referral information is more valuable for young workers, people switching jobs from suburbs to the inner city, and those changing their industrial sectors. Firms receiving referrals are associated with more successful recruits and faster growth.

with Xin Gao

Funded by Small Grant in Labor Economics Cornell University

Aging and an increasing retired population are a global challenge. Previous studies suggest that retirement affects economic behaviors of the retiree and his or her spouse, including consumption, health outcome, and time use. However, little is known about the intergenerational effects of parental retirement on adult children. This paper studies the effects of parental retirement on adult children's labor supply through intergenerational time and monetary transfer. We exploit the mandatory retirement age in China as the cut-off point and apply a regression discontinuity (RD) approach to four waves of the China Family Panel Studies (CFPS) Dataset. Our findings suggest that parental retirement reduces adult children's annual hours of labor supply by 3 to 4 percent. This reduction is especially pronounced for female children. We find that the reduction can be explained by parents' increasing demand for time and care from children due to the significant drop in parents' self-rated health upon retirement. Although both male and female children increased their monetary and time transfers to parents, we find that parents tend to make more transfers to sons compared to daughters. Daughters are also more likely to make transfers to parents after they retire, both in terms of money and in terms of time. We therefore urge policy makers to increase formal eldercare provisions and provide workplace amenities such as flexible working hours, especially for female employees.

Works in Progress

"Direct and Spillover Effects of Bank Lending in Bank-Firm Networks Following Tariff Reductions"

with Yimeng Tang

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