Mr Xijie Gao

Mr Xijie Gao

PhD Candidate in Economics

Department of Economics

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Languages
English, Mandarin
Key Expertise
Macroeconomics, Productivity and Firm Dynamics

About me

Research interests
Macroeconomics, Productivity and Firm Dynamics (primary)
Industrial Organization (secondary)

Job market paper
Marketing, Market Power, and Aggregate Productivity

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Firms spend substantial resources on marketing to differentiate from competitors and gain market power. Using aggregate and firm-level data, I document that (i) aggregate marketing intensity in the US increased sharply around the mid-1990s, (ii) there is a positive correlation between the firm-level Marketing-Production Cost Ratio (MPCR) and the markup, and (iii) the cross-sectional MPCR-markup elasticity co-moves closely with aggregate marketing intensity. To explain these facts, I develop a model with heterogeneous firms and endogenous markups in which firms engage in marketing to signal their quality. The existence of information frictions generates a positive correlation between MPCR and markup. Technical changes that increase the returns to marketing fuel the signalling competition and generate co-movement between MPCR-markup elasticity and aggregate marketing intensity. I use a calibrated version of the model to quantify the impact of information frictions and marketing on aggregate productivity. I find that quality information revealed by marketing is valuable and access to marketing cannot undo the information frictions completely.

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Xijie Gao:

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Publications and additional papers

Zombie Congestion, Entry Selection and Resource Misallocation

Abstract: This paper studies the impact of zombie congestion on the economy. Using firm-level data in China, I find that zombie firms are larger and less productive and receive more subsidies from the government. The congestion of zombie firms affects the productivity distribution of new entrants. The direction of the impact depends on the relative size of zombie incumbents: when zombie incumbents are relatively small (large), a higher zombie rate would increase (decrease) the productivity of entrants. To explain these facts, I develop a model with heterogeneous firms and zombie dynamics. The existence of status-specific subsidy and exit-delaying friction could generate the correlation between the impact of zombie congestion and the relative size of zombie incumbents. A calibrated version of the model is used to quantify the welfare gains from a decline of zombie congestion. Decreasing the exit-delaying friction to match the drop of zombie rate between 1999 and 2005, aggregate output and consumption increase by 1.4 percent and 3.8 percent respectively.

Contacts

Placement Officer
Professor Mark Schankerman

Supervisor
Professor Wouter Den Haan
Dr Rachel Ngai

References
Professor Wouter Den Haan
Dr Rachel Ngai
Professor John Van Reenen
Professor Ricardo Reis

Contact information

Email
x.gao3@lse.ac.uk

Phone number
+44 (0)7729815366

Room number
32L.1.07

Office Address
Department of Economics,
London School of Economics and Political Science,
Houghton Street, London WC2A 2AE