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Abstract:

Journal article
Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity
Nicholas Bloom, Mirko Draca and John Van Reenen January 2016

The Review of Economic Studies 83(1), 2016
DOI: 10.1093/restud/rdv039
https://academic.oup.com/restud/article/83/1/87/2461318


Tags: china; technical change; trade; firm survival; employment

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.

DOI: 10.1093/restud/rdv039
https://academic.oup.com/restud/article/83/1/87/2461318