Seminar Vol. 179

Title: Uncertainty, Imperfect Information and Learning in the International Market

Speaker: Chang Sun, University of Hong Kong

Time: September 26th, 2019  13:30-15:00

Venue: Conference Room 406, Zengxianzi Science Hall

About the speaker:

Chang Sun is an Assistant Professor in the Faculty of Business and Economics, University of Hong Kong, which he joined in 2017 after receiving Ph.D. in Economics from Princeton University. His research concerns the impact of globalization, especially the patterns and consequences of multinational production.

Abstract:

Using a dataset of Japanese multinational firms that contains firm-level sales forecasts, we provide new evidence on imperfect information and learning over the firm's life cycle. We find that firms make non-negligible and positively correlated forecast errors over time. However, they make more precise forecasts and less correlated forecast errors, as they become more experienced. We then build a model with heterogeneous firms that gradually learn about their demand. We quantify the learning and real options channels along the age dimension, through which greater micro-level uncertainty adversely affects resource allocation at the extensive margin and thus depresses productivity.