ECONOMIC RESEARCH AND ANALYSIS
Xiang Ding's paper provides novel and quantitatively important evidence on cross-industry linkages, particularly joint production arising from industries sharing knowledge inputs such as research and development, information technology, and other professional services. The paper finds that in firms that make multiple products, a rise in demand in one industry to which the firm sells also increases the firm's sales to other industries. These positive cross-product linkages are found where industries share knowledge inputs but not where they share other kinds of inputs such as physical inputs and intermediate components. Knowledge inputs have a special role in joint production because they allow capital to be more flexibly deployed across the firm's various products to find its best match.
These findings have implications for the re-evaluation of trade restrictions as there is found to be a lesser tendency for protectionist policies to raise consumer prices if the measures are focused on knowledge-intensive industries. This is because, when industries share knowledge, producer prices (PPI) fall or increase less not only in industries that are directly protected, but also in industries that are jointly produced. According to the Academic Selection Panel, the paper is likely to have a substantial impact on trade policy going forward. The panel is also of the view the paper has clear trade policy relevance, and touches on a wide range of literature.
Xiang Ding is from Hong Kong, China. He received his Ph.D. from Harvard University in 2020. He is currently Assistant Professor at Georgetown University, Walsh School of Foreign Service.
The winning paper is available here.
The Selection Panel for the year 2020 comprised Beata Javorcik (Professor of Economics, University of Oxford), Robert Koopman (Director, Economic Research and Statistics Division, WTO), Robert Staiger (Professor of Economics, Dartmouth University), Alberto Trejos (Professor of Economics, INCAE Business School). Roberta Piermartini (Chief of Trade Cost Analysis, Economic Research and Statistics Division, WTO) coordinated the work of the Selection Panel.