Thesis in macroeconomics and Chinese economy

This dissertation examines the heterogeneous macroeconomic impacts of industrial and environmental policies on firm behavior, innovation, and regional development in China. The first chapter studies the effects of robot subsidies in the manufacturing sector. Exploiting variation in subsidy rollout across municipalities, I find that robot subsidies, while designed to be uniform across firms, disproportionately benefit larger firms at the cost of reducing new firm entry. I then build a theoretical framework to highlight how financial frictions cause a uniform subsidy to favor capital-rich firms, creating a trade-off between average automation gains and productivity-reducing dispersion. A calibrated dynamic model shows that a 20 percent subsidy raises output by around 1.2 percent but reduces total factor productivity by around 2.4 percent due to exacerbation of misallocation. The second chapter investigates the impact of electric vehicle (EV) subsidies on innovation along the supply chain. Using a newly compiled dataset of over 1,000 municipal subsidy policies, I document sharp differences in effectiveness across subsidy types. Innovation and public procurement subsidies significantly boost both downstream and upstream patenting, while investment and purchase subsidies show limited impact. These findings underscore the importance of aligning policy design with supply chain dynamics to foster industrial upgrading. The third chapter evaluates the economic consequences of flood control policies that real-locate environmental risk. Exploiting the designation of 96 counties as Flood Detention Basins (FDBs), I show that these counties experience lower firm entry, reduced investment, and declining nighttime lights. A spatial general equilibrium model reveals that while FDBs increase national flood resilience, the economic burden falls disproportionately on rural areas. Together, these chapters shed light on the distributional and efficiency trade-offs of industrial and environmental interventions in a developing economy context.