Machines Could Not Compete with Chinese Labor: Evidence from U.S. Firms’ Innovation

91 Pages Posted: 2 Jun 2015 Last revised: 22 Dec 2022

See all articles by Jan Bena

Jan Bena

University of British Columbia - Sauder School of Business

Elena Simintzi

Centre for Economic Policy Research (CEPR); University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Date Written: December 20, 2022

Abstract

We study how an improvement in contracting institutions due to the 1999 U.S.-China bilateral agreement affects U.S. firms' innovation. We show that U.S. firms operating in China decrease their process innovations-innovations that improve firms' own production methods-following the agreement. We obtain the same result using the inter-temporal variation in ownership restrictions on foreign investment in China across industries. These findings suggest that a better ability to source labor cheaply across borders affects the types of technologies that are being developed-less process innovation aimed at reducing production cost. More broadly, a decrease in the effective price of labor due to the removal of frictions affects the direction of corporate innovation.

Keywords: process innovation, technological change, labor, China

JEL Classification: O33, J31, L23

Suggested Citation

Bena, Jan and Simintzi, Elena, Machines Could Not Compete with Chinese Labor: Evidence from U.S. Firms’ Innovation (December 20, 2022). Available at SSRN: https://ssrn.com/abstract=2613248 or http://dx.doi.org/10.2139/ssrn.2613248

Jan Bena

University of British Columbia - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
+1 604 822 8490 (Phone)

HOME PAGE: http://www.janbena.com

Elena Simintzi (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,269
Abstract Views
7,189
Rank
26,101
PlumX Metrics