Working Paper: NBER ID: w24715
Authors: Pian Shu; Claudia Steinwender
Abstract: This chapter reviews the empirical economics literature on the impact of trade liberalization on firms' innovation-related outcomes. We define and examine four types of shocks to trade flows: import competition, export opportunities, access to imported intermediates, and foreign input competition. Our review reveals interesting heterogeneities at the country and firm levels. In emerging countries, trade liberalization appears to spur productivity and innovation. In developed countries, export opportunities and access to imported intermediates tend to encourage innovation, but the evidence on import competition is mixed, especially for firms in the United States. At the firm level, the positive effects of trade on innovation are more pronounced at the initially more productive firms while the negative effects are more pronounced at the initially less productive firms.
Keywords: No keywords provided
JEL Codes: F13; F14; F61; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade liberalization (F13) | productivity (O49) |
| trade liberalization (F13) | innovation (O35) |
| export opportunities (F10) | innovation (O35) |
| access to imported intermediates (F10) | innovation (O35) |
| import competition (L13) | innovation (O35) |
| initial productivity level (O49) | response to import competition (F14) |
| Schumpeterian effect (E32) | innovation (O35) |
| escape-competition effect (L13) | innovation (O35) |
| preference effect (D11) | innovation (O35) |
| larger, more productive firms (L25) | benefit from trade liberalization (F14) |