Xianglong (Sean) Kong

Job Market Paper

Learning in Firm-to-Firm Trade (with Emmanuel Dhyne)

Abstract: We study how firms’ productivity growth depends on the productivity of their suppliers and buyers and examine the aggregate implications of this form of learning. Using data on firm-to-firm transactions in Belgium, we document evidence consistent with learning from both suppliers and buyers, particularly from the most productive ones. To study the implications of this form of learning in general equilibrium, we develop a model in which firm productivity growth is shaped by the productivity of an endogenously formed network of suppliers and buyers, where firms bargain over the surpluses from trade and learning. Learning between suppliers and buyers increases bilateral trade volumes: suppliers charge lower markups when they learn more from buyers, and buyers have higher demand when they learn more from suppliers. We estimate a small open economy model with firms learning from both domestic and foreign trading partners. Quantitatively, we find that the value of learning is equivalent to 19 percent of aggregate consumption. Welfare gains from reductions in international trade participation costs are underestimated by over 7 percent without learning. Gains from trade are amplified when foreign partners are more productive through productivity catch-up and network upgrading, but are dampened when less productive foreign firms crowd out domestic learning and weaken incentives to form productive relationships.

Publications

• Endogenous Production Networks with Fixed Costs (with Emmanuel Dhyne, Ken Kikkawa, Magne Mogstad, and Felix Tintelnot)

Journal of International Economics, 2023, Volume 145, 103841

• Doing Business Far from Home: Multinational Firms and Labor Market Outcomes in Saudi Arabia (with Alessandra L. González)

European Economic Review, 2025, Volume 172, 104944

Working Papers

• Firm Life Cycle, Endogenous Production Networks, and Frictional Labor Market (with Emmanuel Dhyne and Toshiaki Komatsu)

• Policy Signals, Cultural Norms, and the Misallocation of Talent (with Alessandra L. González and Jennifer Peck)

Works in Progress

• Geographic Diversification in Home Insurance Markets (with Christina Qiu and Mark Walker)

• Place-Based Industrial Policy in Endogenous Production Networks (with Kieran Marray, Kathryn McDonald, Peter Öhlinger, and Ruochen Dai)

• Trade Credit Insurance and Supply Chain Resilience (with TSZ Chai Fung, Honglin Li, and Woongchae Yoo)