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Estimating the Productivity Selection and Technology Spillover Effects of Imports

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  • Ram C. Acharya
  • Wolfgang Keller

Abstract

Economists emphasize two channels through which import liberalization affects productivity, one operating between and the other within firms. According to the former, import competition triggers market share reallocations between domestic firms with different technological capabilities (selection). At the same time, imports can also improve firms' technologies through learning externalities (spillovers). We present evidence for a sample of industrialized countries over the period 1973 to 2002. First, in the long run, import liberalization lowers productivity in domestic industries through selection. This finding confirms the prediction of models with firm heterogeneity, including Melitz and Ottaviano (2008), in which unilateral liberalization lowers the profits of domestic relative to foreign exporters. Second, if imports involve advanced foreign technologies, liberalization also generates technological learning that can on net raise domestic productivity. Third, for short time horizons of up to three years, a surge in imports typically raises domestic productivity. Because the number of firms at home and abroad does not change much in the short-run, new competition from foreign firms has a pro-competitive effect. We also find that high entry barriers, especially regulation, slow down the process of market share reallocation between firms. Over- all, the results support models in which trade triggers both substantial selection and technological learning.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14079.

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Date of creation: Jun 2008
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Publication status: published as International Trade, Foreign Direct Investment, and Technology Spillovers, Chapter 19 in B. Hall, N. Rosenberg (eds.), Handbook of the Economics of Innovation, Elsevier North-Holland, 2010
Handle: RePEc:nbr:nberwo:14079

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Cited by:
  1. Itzhak Goldberg & John Gabriel Goddard & Smita Kuriakose & Jean-Louis Racine, 2011. "Igniting Innovation : Rethinking the Role of Government in Emerging Europe and Central Asia," World Bank Publications, The World Bank, number 2358, August.
  2. Nicholas Bloom & Mirko Draca & John Van Reenen, 2011. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," CEP Discussion Papers, Centre for Economic Performance, LSE dp1000, Centre for Economic Performance, LSE.
  3. Richard Harris, 2009. "Spillover and Backward Linkage Effects of FDI: Empirical Evidence for the UK," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0016, Spatial Economics Research Centre, LSE.
  4. Helena Schweiger & Guido Friebel, 2013. "Management Quality, Ownership, Firm Performance and Market Pressure in Russia," Open Economies Review, Springer, Springer, vol. 24(4), pages 763-788, September.
  5. Edward N. Wolff, 2011. "Spillovers, Linkages, and Productivity Growth in the US Economy, 1958 to 2007," NBER Working Papers 16864, National Bureau of Economic Research, Inc.
  6. Guido Friebel & Helena Schweiger, 2012. "Management quality, firm performance and market pressure in Russia," Working Papers, European Bank for Reconstruction and Development, Office of the Chief Economist 144, European Bank for Reconstruction and Development, Office of the Chief Economist.
  7. Anna Bohnstedt, 2013. "Spillovers from Foreign Exporters," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0400, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  8. Bezemer, Dirk & Grydaki, Maria, 2013. "Debt and the U.S. Great Moderation," MPRA Paper 47399, University Library of Munich, Germany.

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