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

IMF Working Papers, November 16, 2017

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

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Bibliographic details

• Authors: Rui Xu, Kaiji Gong
• Published: November 16, 2017
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484326008.001

Key findings

• Import competition from China induces R&D expenditures to be reallocated towards more productive and more profitable firms within each industry.
• The reallocation effect has the potential to offset the average drop in firm-level R&D identified in the previous literature.
• Quantitative analysis in the paper shows no adverse impact of import competition on aggregate R&D expenditures.
• Beyond manufacturing, import competition has led to reallocation of researchers towards booming service industries, including business and repairs, personal services, and financial services.

Data and scope

• Data source: Compustat data.
• Sectoral coverage: Manufacturing and services (explicitly includes business and repairs, personal services, and financial services).

Implications and interpretation

• Reallocation toward higher-productivity and higher-profit firms can neutralize negative firm-level R&D shocks, leaving aggregate R&D unchanged in the face of rising import competition.
• Shifts in researcher employment patterns indicate cross-sectoral effects of import competition, with services benefiting from researcher reallocation.

Content in this bundle

• Does Import Competition Induce R&D Reallocation? Evidence from the U.S., WP/17/253, November 2017
  • Does Import Competition Induce R&D Reallocation? Evidence from the U.S., WP/17/253, November 2017 (Markdown version)
  • Does Import Competition Induce R&D Reallocation? Evidence from the U.S., WP/17/253, November 2017 (PDF)