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Does Trade Stimulate Innovation?: Evidence from Firm-Product Data

Author

Listed:
  • Ana Margarida Fernandes

    (World Bank)

  • Caroline Paunov

    (OECD)

Abstract

This paper investigates whether increased import competition leads firms to engage in incremental innovation reflected in product quality upgrading. The econometric analysis relies on a rich dataset of Chilean manufacturing firms and their products. Product quality is measured with unit values (prices) and imports’ transport costs are used as an exogenous proxy for import competition. The estimates show a negative effect of transport costs on product quality. The paper provides explicit evidence that estimated increases in unit values capture product quality upgrading, and that competition effects of imports explain our results. Easier access to intermediate inputs also fosters quality upgrading. Cet article examine si le fait d’être en compétition avec des produits d’importation affecte la décision des entreprises de s’engager dans l’innovation incrémentale, qui se reflète dans une amélioration de la qualité des produits. Les résultats économétriques sont fondés sur de riches données chiliennes d’entreprises et de leurs produits. La qualité des produits est mesurée par leur valeur unitaire (leur prix) et le coût de transport des importations est utilisé comme une mesure exogène du degré de compétition des importations. Les estimations montrent un effet négatif du coût de transport sur la qualité des produits. L’article démontre que les incréments dans la valeur unitaire reflètent les incréments dans la qualité des produits et que la compétition explique nos résultats. Un accès plus aisé aux produits intermédiaires participe également à une amélioration de la qualité des produits.

Suggested Citation

  • Ana Margarida Fernandes & Caroline Paunov, 2010. "Does Trade Stimulate Innovation?: Evidence from Firm-Product Data," OECD Development Centre Working Papers 286, OECD Publishing.
  • Handle: RePEc:oec:devaaa:286-en
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    File URL: http://dx.doi.org/10.1787/5kmmp8g92x34-en
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alessia Lo Turco & Daniela Maggioni, 2015. "Imports, Exports and the Firm Product Scope: Evidence From Turkey," The World Economy, Wiley Blackwell, vol. 38(6), pages 984-1005, June.
    2. Paulo Bastos & Odd Rune Straume, 2012. "Globalization, product differentiation, and wage inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 857-878, August.
    3. Alejandro Cuñat & Szabolcs Deak & Marco Maffezzoli, 2008. "Tax Cuts in Open Economies," CEP Discussion Papers dp0860, Centre for Economic Performance, LSE.
    4. Lo Turco, Alessia & Maggioni, Daniela, 2013. "Does Trade Foster Employment Growth in Emerging Markets? Evidence from Turkey," World Development, Elsevier, pages 1-18.
    5. Alfons Palangkaraya, 2013. "On the Relationship between Innovation and Export: The Case of Australian SMEs," Melbourne Institute Working Paper Series wp2013n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    6. Fukunari Kimura, 2010. "The Spatial Structure of Production/Distribution Networks and its Implication for Technology Transfers and Spillovers," Chapters,in: Input Trade and Production Networks in East Asia, chapter 8 Edward Elgar Publishing.

    More about this item

    Keywords

    Chile; Chili; compétition des importations; coût de transport; données de firmes; entreprises multi-produits; firm level data; import competition; incremental innovation; innovation incrémentale; multi-product firms; output; product quality; qualité des produits; transport costs; unit values; valeur unitaire de la production;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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