Microeconomics Seminar with Michela Giorcelli (UCLA)

Abstract: This paper studies the short- and long-run effects of international technology transfer on early industrial development, using evidence from the Sino-Soviet Alliance. Between 1950 and 1957, the Soviet Union supported the so-called “156 technology transfer projects” in China, which involved constructing large, capital-intensive plants in heavy industries, transferring state-of-the-art Soviet machinery and equipment, and diffusing technical assis-tance and know-how from Soviet engineers to their Chinese counterparts. We hand-collected archival data on the 156 projects, which we complemented with plant-, firm-, and provincial-level information from 1949 to 2013. To estimate the causal effect of the program, we exploit that, due to unanticipated political tensions between the two countries, some projects were built as planned with Soviet machinery and technical assistance (treated projects) while others were eventually realized by China alone, without any Soviet technology or assistance (comparison projects). We find that (1) plants in treated projects performed better than plants in comparison projects in both the short run and the long run; (2) Soviet technical assistance diffused industry-specific knowledge through the training of Chinese engineers, which further increased plant outcomes; (3) the program generated local horizontal and vertical spillovers; (4) production in treated project counties was substantially reallocated from state-owned to privately owned companies after the waves of privatization started in 2005.

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