IMF Working Papers

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

By Rui Xu, Kaiji Gong

November 16, 2017

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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

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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:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2017/253

  • Stock No:

    WPIEA2017253

  • ISBN:

    9781484326008

  • ISSN:

    1018-5941