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Paper by Dr. Huabin Wu Published in Management World
April 26, 2012

Lately, IAR Assistant Research Fellow Dr. Huabin Wu had a co-authored paper published in a top Chinese field journal—Management World (3rd issue, 2012). The paper is titled "Organizational Capital and Chinese Business Cycle".

The abstract of the paper is as follows: Organizational Capital (OC) as an intangible asset originates from the firm's production process. In addition to its direct effect on the marginal productivity, OC also plays an important role in the aggregate level. In this paper, we incorporate OC as an input into Chinese aggregate production function. Based on a dynamic stochastic general equilibrium model, we conduct the estimation procedure through Bayesian approach. We find that the model with OC statistically differs with the traditional RBC model, and the former explains Chinese data much better. Moreover, our simulation results show that: (1) Ignoring OC might significantly overstate the role of TFP as a proxy to the technology shock in business cycle frequency; (2) OC introduces an internal propagation mechanism, which endues our model more explanatory power; (3) The OC specification shock has significant impact on the business cycle that contributes around 25% of the total volatility.

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