Xufeng Wang

Abstract: Industries are connected through global value chains, yet industrial policies are often evaluated at the level of industries rather than the value chain transactions that link them. This paper shows that the same industry can generate markedly different national welfare returns depending on where support enters its value chain. I develop an international production network model that evaluates industrial policy at the level of supplier-purchaser transactions rather than industries and accommodates both imperfect competition and external economies of scale. Applying the framework to 925 manufacturing country-industry pairs across 49 economies, I find that supporting an industry through its domestic intermediate input purchases ("buying local") or its sales to domestic producers ("selling local") raises national welfare by more than 15 cents per euro of fiscal expenditure, on average, relative to the corresponding production and sales subsidies. These advantages appear in nearly all country-industry pairs. Moreover, when markups or external economies of scale are present, buying local and selling local policies generate positive national welfare gains in most country-industry pairs, and these gains remain substantial when other countries adopt similar policies, indicating that they primarily reflect improvements in domestic allocative efficiency rather than beggar-thy-neighbor redistribution.

Abstract: Existing targeting rules for sectoral spending policy emphasize government-demand shares, markups, labor intensity, downstreamness, and price stickiness. I show that these seemingly distinct criteria are unified by a common sufficient statistic that fully characterizes sectoral multiplier rankings. I develop a production-network model with heterogeneous wedges, endogenous factor supply, static sectoral price stickiness, and alternative factor-market structures, encompassing integrated, segmented, and imperfectly segmented factor markets. I derive a closed-form decomposition showing that each multiplier consists of a common component, which shifts all multipliers uniformly, and a sector-specific component, which determines cross-sector rankings. The ranking component is a weighted sum of factor-specific Leontief-inverse exposures, implying that cross-sector variation in multipliers is governed by the direct and indirect primary-factor requirements embodied in each sector's output and the equilibrium weights attached to them. Observable sectoral characteristics matter only insofar as they affect these exposures or the associated weights. Calibrating the model to U.S. input-output data, I find that high-multiplier sectors tend to be characterized by relatively low exposure to inelastic factors. Government-demand shares become important under segmented factor markets, while sectoral price stickiness further reshapes multiplier rankings. Consistent with the theory, markups and upstreamness exhibit no robust relationship with multiplier rankings. The sufficient-statistic characterization explains when standard targeting criteria succeed, fail, or reverse.

Abstract:  We study how revenue productivity and markups evolve after mergers across the economy. In financial-statement data, targets cease to exist as reporting entities after a deal, so tracking the merged firm requires constructing the combined acquirer-target unit before the merger. We formalize the biases that arise without this correction and implement it across 3,759 horizontal mergers in Spain between 1997 and 2022. Revenue productivity rises by approximately 4 percent within eight years and markups by approximately 5 to 6 percent. The industry decomposition reveals that revenue productivity gains are broad-based, while markup increases are concentrated. Most industries show modest markup effects of 3 percent or less, and the largest increases arise in two industries with a small share of deals, led by human health activities. We find that without the boundary correction, both estimated effects reverse sign. The results suggest that mergers tend to raise the revenue productivity of the combined firm broadly, consistent with operational improvements, while large markup increases are a feature of specific industries rather than a general consequence of consolidation.