We study the world interest rate drivers of sovereign spreads in emerging markets. Utilizing a structural VAR, we identify the demand and supply shocks that differentially impact world interest rate, global output, emerging market output, sovereign spread, and convenience yield. These shocks suggest substantial risk premia for sovereign bonds, which vary with world interest rates and exhibit considerable cross-country dispersion. A model with structural shocks quantitatively explains the effect of interest rates on sovereign default. The model indicates a higher correlation between spreads than between outputs. Our findings highlight the importance of distinguishing the various drivers of world interest rates that impact sovereign spreads in distinct ways.

This paper studies how knowledge diffusion affects the composition of innovation using Chinese patent data. We argue that easier access to existing knowledge and technologies can reduce the cost of exploiting known information compared to exploring unknown areas. This implies that knowledge diffusion may lead to more incremental innovation but fewer breakthrough innovations. We first show this idea in a two-city and two-sector model and then empirically investigate how knowledge diffusion accelerated by transportation cost reduction affects the composition of local innovations. Our analysis, based on text analysis of a large-scale dataset of Chinese patent filings, assesses the breakthrough nature of local innovations from two aspects: the city-level proportion of influential innovations and the cross-city innovation diversity.

This research explores how social disconnectedness uniquely impacts women's creativity. While social disconnectedness (i.e. loneliness) is typically perceived as detrimental, it can also help set individuals free of societal conformist influences. Integrating loneliness research with gender role theory, we hypothesize that social disconnectedness can reduce the influences of women’s traditional gender roles that prescribe conformity and norm compliance, thus enhancing women's creativity. In comparison, social disconnectedness is expected to have less pronounced impact on men’s creativity as their gender roles already emphasize independence and nonconformity. Using a time-lagged, multisource field study of assembly line workers (n = 188) where we collected real employees’ creative ideas relevant to the workplace, we found that social disconnectedness enhanced creativity for women, but not for men. We conducted follow-up qualitative interviews that produced insights into the underlying, gender-specific mechanism. We then conducted an experiment (n = 200) where we independently manipulated workplace social disconnectedness and participant gender. Results showed that social disconnectedness enhanced women’s (but not men’s) creativity via increasing non-conformity. This research challenges the prevailing negative view of social disconnectedness and presents a functional perspective where it can help women overcome traditional limitations and express their creativity.