Applied Micro Seminar - Michela Giorcelli (UCLA)

Title: Technology Transfer and Early Industrial Development: Evidence from the Sino-Soviet Alliance

Abstract: This paper provides evidence of the long-run effects of technology transfer on the early stages of industrial development, using evidence from the Soviet technical assistance to China. This plan was a vital factor in the Chinese industrial development in late 1950s, and involved total investments for USD 30 billion (in 2020 value), as well as the cooperation of thousands of Soviet engineers with their Chinese counterpart. We hand-collected archival data on the USSR-sponsored technology transfer "156 Projects", that we complement with provincial, prefecture and firm-level data up to 20 years and 50 years after the program. In 1963, after unexpected political tensions, the Sino-Soviet relationship came to an end and some planned technology transfer projects were suspended. By exploiting the Sino-Soviet Split, we compare the performance of companies that received the USSR technology transfer (treated firms) with those of firms which were supposed to receive it, but eventually did not due to the split (comparison firms). Our results indicate that the performance of treated firms improved in the first 20 years after the program, with respect to the comparison companies, but the effect did not persist 50 years after it. However, provinces and prefectures where treated firms were located had higher output and employment – compared to provinces and prefectures where comparison firms were located. Moreover, there was a larger reallocation of output and investment from state-owned to private firms in treated prefectures relative to comparison prefectures after privatizations in 2000s.