Journal Article

Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity

Nicholas Bloom, Mirko Draca and John Van Reenen

in The Review of Economic Studies

Volume 83, issue 1, pages 87-117
Published in print January 2016 | ISSN: 0034-6527
Published online September 2015 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1093/restud/rdv039
Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity

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  • Technological Change; Research and Development
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We examine the impact of Chinese import competition on broad measures of technical change—patenting, IT, and TFP—using new panel data across twelve European countries from 1996 to 2007. In particular, we establish that the absolute volume of innovation increases within the firms most affected by Chinese imports in their output markets. We correct for endogeneity using the removal of product-specific quotas following China's entry into the World Trade Organization in 2001. Chinese import competition led to increased technical change within firms and reallocated employment between firms towards more technologically advanced firms. These within and between effects were about equal in magnitude, and account for 14% of European technology upgrading over 2000–7 (and even more when we allow for offshoring to China). Rising Chinese import competition also led to falls in employment and the share of unskilled workers. In contrast to low-wage nations like China, developed countries had no significant effect on innovation.

Keywords: China; Technical change; Trade; Firm survival; Employment; O33; F14; L25; L60

Journal Article.  17128 words.  Illustrated.

Subjects: Technological Change; Research and Development ; International Trade ; Firm Objectives, Organization, and Behaviour ; Manufacturing

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