Working Papers

Consequences of Indian Import Penetration in the US Pharmaceutical Market (Job Market Paper)

Indian pharmaceutical firms vastly increased generic drug exports to Western countries, and particularly the United States, in response to India amending its patent protection law in 2005. This paper demonstrates that Indian import penetration in the U.S. pharmaceutical industry was stronger among drugs that included active pharmaceutical ingredients which Indian firms had the capability to manufacture before 2005. These 'treated' drugs experienced a larger drop in prices and increased competition from Indian firms. However, non-Indian firms responded to the trade shock by exiting 'treated' drugs, in that they were more likely to discontinue and less likely to newly register 'treated' drugs. This strategic change was stronger for firms with larger shares of drug sales exposed to Indian import penetration. Rather than exploring new pharmaceutical ingredients, non-Indian firms opted to continue selling drugs they already had experience producing. The law change also led to disruptions in foreign supply chains, with 'treated' drugs facing more drug shortages. These findings show how competition in the pharmaceutical industry is shaped by supply side shocks and how a trade-driven influx of competition could crowd out incumbent firms.

Affirmative Action and Bidding Behaviors in the Procurement Market

Affirmative action has been used to provide support for firms in minority groups, but it has been criticized for distorting resource allocation and incurring economic costs. This paper finds that affirmative action can increase firm activity with preferential treatment in post-bid processes. The setting I focus on is a law in South Korea requiring a mandatory quota to buy from ‘certified’ female firms for all public institutions in the procurement market. ‘Certified’ female firms are given preferential treatment in the post-bid evaluation process which assesses the bid winner’s capacity to complete the contract. I find that ‘certified’ female firms increased bidding participation and won more bids. I provide evidence for two mechanisms: previous contracting relationships between institutions and ‘certified’ female firms and networking among those firms. The revenue share of all female-owned firms increased in private markets, suggesting public-to-private spillovers. The post-bid preferential program helped ‘certified’ female firms pass the evaluation process and finally get the contract. However, I find no evidence of efficiency loss. This paper provides distributional and efficiency-related consequences of affirmative action with the preferential treatment provided after the bid winner is chosen.

Research in Progress

Organic Food Consumption and the Market of Biopesticides with Erica Chuang

Environmentalists and economists recognize that innovation in intermediate goods will be a necessary route to minimize the environmental damages from economic activity. However, the composition of that innovation is equally as important to understand. This paper attempts to address the latter by studying how a major change in the organic food market affected product composition in the market for conventional and non-toxic pesticides for use in agriculture, also called biopesticides. Using Walmart’s announcement of a major expansion of organic food offerings in 2006, we find suggestive evidence that an increase in demand for organic produce led to an increase in the share of registered biopesticide products among the market for pesticides. However, new biopesticide products tended to use active ingredients similar in composition to previous products, suggesting incremental innovations rather than truly novel products. In order to understand the environmental impacts of this expansion, we take advantage of data on pesticide use in California, one of the country's largest agricultural producers. We will continue the analysis by exploring the potential impacts of the shock on pesticide use and toxicity characteristics in California. We also plan to investigate firms’ pesticide portfolios to examine if firms were making new biopesticides that are less toxic than previous ones. This analysis will enable us to compare the stated and revealed environmental preferences of firms.

Public Procurement Market and the Direction of Innovation Activities

Procurement contracts provide financial resources to firms but also lead firms to accumulate capital needed for those contracts. Firms may use these capitals for innovation activities after the contract is finished. This paper uses a randomization process in bidding processes in the Korean public procurement market and finds that bid winners were more likely to apply for patents after they won the bid. Using the textual similarity between procurement contracts and applied patents, I will continue the analysis to investigate the potential impacts of attaining procurement contracts on the direction of the following innovation activities.


Factors of Risks of Household Over indebtedness Using a New Measure Based on Conditional Quantiles with Lee, D. J., Korea Review of Applied Economics, 2017 (in Korean)

This paper suggests a new measure of household over-indebtedness based on the concept of conditional quantiles, and use it to examine the factors of the over-indebtedness. We first consider a distribution of household debt conditional on the overall payment ability, and specify the over-indebted household as the one whose debt exceeds θ-quantile of the conditional distribution. We find a clear evidence of heterogeneous behavior in that over-indebted households’ income and real estate elasticities of debt are significantly higher. We also find that lower-income and elderly-headed households have significantly higher debt/income ratio compared to the other age and income groups.