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Oxford Economic Papers Advance Access originally published online on October 11, 2005
Oxford Economic Papers 2006 58(2):317-350; doi:10.1093/oep/gpi043
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© Oxford University Press 2006 All rights reserved

Does innovation cause exports? Evidence from exogenous innovation impulses and obstacles using German micro data

Stefan Lachenmaier* and Ludger Wößmann{dagger}

*Ifo Institute for Economic Research at the University of Munich {dagger}Ifo Institute for Economic Research at the University of Munich and CESifo, Poschingerstr. 5, 81679 Munich, Germany;

Correspondence: e-mail: woessmann{at}ifo.de

Trade and growth theories predict a mutual causation of innovation and exports. We test empirically whether innovation causes exports using a uniquely rich German micro dataset. Our instrumental-variable strategy identifies variation in innovative activity that is caused by specific impulses and obstacles reported by the firms, which can reasonably be viewed as exogenous to firms’ export performance. We find that innovation attributable to this variation leads to an increase of roughly seven percentage points in the export share of German manufacturing firms. The evidence is robust to several alternative specifications and heterogeneous across sectors, being stronger in technology-intensive sectors.

Key Words: JEL classification: F1 • O3 • L1


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