Estimating the Productivity Selection and Technology Spillover Effects of Imports

37 Pages Posted: 17 Jun 2008

See all articles by Ram C. Acharaya

Ram C. Acharaya

Government of Canada - Industry Canada

Wolfgang Keller

University of Colorado; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2008

Abstract

In the wake of falling trade costs, two central consequences in the importing economy are, first, that stronger competition through increased imports can lead to market share reallocations among domestic firms with different productivity levels (selection). Second, the increase in imports might improve domestic technologies through learning externalities (spillovers). Each of these channels may have a major impact on aggregate productivity. This paper presents comparative evidence from a sample of OECD countries. We find that the average long run effect of an increase in imports on domestic productivity is close to zero. If the scope for technological learning is limited, the selection effect dominates and imports lead to lower productivity. If, however, imports are relatively technology-intensive, imports also generate learning that can on net raise domestic productivity. Moreover, there is somewhat less selection when the typical domestic firm is large. The results support models in which trade triggers both substantial selection and technological learning.

Keywords: Market shares, R&D, Technology investments

JEL Classification: F1, O3, O33

Suggested Citation

Acharaya, Ram C. and Keller, Wolfgang, Estimating the Productivity Selection and Technology Spillover Effects of Imports (June 2008). CEPR Discussion Paper No. DP6860, Available at SSRN: https://ssrn.com/abstract=1146824

Ram C. Acharaya (Contact Author)

Government of Canada - Industry Canada ( email )

10-East, 235 Queen Street
Ottawa, Ontario K1A 0H5
Canada

Wolfgang Keller

University of Colorado ( email )

Department of Economics
PO Box 256
Boulder, CO 80309
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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