Effects of Chinese Imports on U.S. Firm Innovation: Evidence from the U.S.-China Permanent Normal Trade Relation

57 Pages Posted: 13 Jun 2019

See all articles by Tao Chen

Tao Chen

Nanyang Technological University (NTU) - Division of Banking & Finance

Huasheng Gao

Fanhai International School of Finance, Fudan University

Yuxi Wang

Shanghai Jiao Tong University - Antai College of Economics and Management

Date Written: May 28, 2019

Abstract

The 2018 U.S.-China trade war has spurred wide-spread debates about the effects of Chinese imports on U.S. society. We examine the effect of United States’ conferral of Permanent Normal Trade Relations (PNTR) on China — a policy that eliminates the uncertainty of future tariff increases for Chinese goods — on U.S. firm innovation. We find a significant increase in the number of patents and patent citations for U.S. firms affected by PNTR relative to other firms. This result is stronger for firms located in the coastal area, and for firms in industries that experience a greater increase in Chinese goods following PNTR. Our evidence suggests that PNTR induces U.S. firms to innovate more.

Keywords: Permanent Normal Trade Relations, Innovation, Patents, Imports, China

JEL Classification: G38, O31

Suggested Citation

Chen, Tao and Gao, Huasheng and Wang, Yuxi, Effects of Chinese Imports on U.S. Firm Innovation: Evidence from the U.S.-China Permanent Normal Trade Relation (May 28, 2019). Available at SSRN: https://ssrn.com/abstract=3396232 or http://dx.doi.org/10.2139/ssrn.3396232

Tao Chen

Nanyang Technological University (NTU) - Division of Banking & Finance ( email )

S3-B1A-08, Nanyang Avenue
Singapore, 639798
Singapore

Huasheng Gao (Contact Author)

Fanhai International School of Finance, Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China
2165642222 (Phone)
2165642222 (Fax)

Yuxi Wang

Shanghai Jiao Tong University - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

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