Does Import Competition Induce R&D Reallocation? Evidence from the U.S.

November 16, 2017

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Format: Chicago

Rui Xu, and Kaiji Gong. Does Import Competition Induce R&D Reallocation? Evidence from the U.S., (USA: International Monetary Fund, 2017) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We analyze the impact of rising import competition from China on U.S. innovative activities. Using Compustat data, we find that import competition induces R&D expenditures to be reallocated towards more productive and more profitable firms within each industry. Such reallocation effect has the potential to offset the average drop in firm-level R&D identified in the previous literature. Indeed, our quantitative analysis shows no adverse impact of import competition on aggregate R&D expenditures. Taking the analysis beyond manufacturing, we find that import competition has led to reallocation of researchers towards booming service industries, including business and repairs, personal services, and financial services.

Subject: Competition, Economic sectors, Expenditure, Financial markets, Imports, International trade, Manufacturing, Services sector

Keywords: Chinese Import Competition, Competition, Firm TFP, Import competition, Imports, Manufacturing, North America, R&D expenditure, R&D Expenditures, R&D investment, Reallocation, Reallocation effect, Services sector, TFP deviation, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/253
Stock No:

WPIEA2017253
ISBN:

9781484326008
ISSN:

1018-5941

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