We investigate the roles played by unexpected demand shocks, besides productivity, on firms' capital investment and exit decisions. We propose a practical approach to recover unexpected firm‐level demand shocks using inventory data. The recognition of demand shocks and inventory also improves the productivity estimation. The empirical results indicate that although productivity and demand shocks are both significant factors determining firm behavior, the former is more dominant for investment decision and the latter is more salient for firm exit. These findings confirm that unexpected demand shocks, besides persistent productivity, are important factors when analyzing capital investment and firm exit decisions.
Academic & Professional Qualification
- Ph.D., Pennsylvania State University
- M.A., Peking University
- B.A., China Youth University for Political Sciences
Dr. Hongsong ZHANG is an Associate Professor of Economics at the University of Hong Kong (HKU), and the Associate Director for the Institute for China and Global Development at HKU. His main research interests cover topics in empirical industrial organization, international trade, and applied microeconomics, with a special focus on how firms’ competitiveness in productivity, supplier network, and demand affects firm performance in the domestic and international markets. His research has been published in leading general interest and top field journals in Economics, such as International Economic Review (x2), European Economic Review, and Journal of Development Economics. Starting 2020, he also serves as an Associate Editor for the International Journal of Industrial Organization (IJIO). He has won multiple external grants from the General Research Funds of the Hong Kong Research Grants Council. He also serves as an Executive Committee Member for China Trade Research Group since 2018.
Dr. Zhang obtained his Ph.D. in Economics from the Pennsylvania State University in 2013, M.A. in Economics from Peking University, and B.A. in Economics from the China Youth University for Political Sciences. He joined the HKU Business School at The University of Hong Kong as Assistant Professor in 2013.
- Empirical Industrial Organization
- International Trade
- Productivity, Supplier Network and Firm Dynamics
- “Does External Monitoring from Government Improve the Performance of State-Owned Enterprises?” with Shengyu Li. The Economic Journal, Accepted, June 2021.
- “What You Import Matters for Productivity Growth: Experience from Chinese Manufacturing Firms”, with Jiawei Mo, Larry D. Qiu, and Xiaoyu Dong. The Journal of Development Economics, Volume 152, September 2021.
- “Non-Neutral Technology, Firm Heterogeneity, and Labor Demand”,
The Journal of Development Economics, Vol 140, Pages 145-168, September 2019.
- “Productivity or Unexpected Demand Shocks: What Determines Firm-Level Investment and Exit Decisions?” with Pradeep Kumar.
The International Economic Review, Vol 60, Issue 1, Pages 303-327, February 2019.
- “Static and Dynamic Gains from Costly Importing of Intermediate Inputs: Evidence from Colombia,”
European Economic Review, Vol 91, pp. 118-145, January 2017.
- “Production Function Estimation with Unobserved Input Price Dispersion,”
(with Paul Grieco and Shengyu Li), International Economic Review, Vol. 57-2, May 2016, pp. 665-690.
- “Epidemics, Inventory, and Markup: Evidence from the 2003 SARS Shock in China”, NEW
with Yating Jiang, 2021. (Draft available upon request)
- “Technology Training, Buyer-Supplier Linkage, and Quality Upgrading in an Agricultural Supply Chain”, NEW
with Sangyoon Park and Zhaoneng Yuan, June 2021.
- “Input Prices, Productivity, and Trade Dynamics: Long-Run Effects of Liberalization on Chinese Paint Manufacturers”,
with Paul Grieco and Shengyu Li, Dec. 2019. R&R
- “Output Quality, Productivity Growth, and Resource Reallocation”,
with Jing Li and Shengyu Li, November 2019.
- “How Do Hospitals Respond Differently to Competition? Quality, Prices, and Efficiency”,
with Mona Luan and Zhigang Tao, August 2018.
- “What Goods Do Countries Produce and Trade? The Role of Technology-Endowment Matching”,
with Xiaoping Chen, 2017.