2024
Working Paper
HBS Working Paper Series

The Consequences of Export Controls in Target Countries

By: Xueyue Liu, Yu Liu and Jaya Y. Wen

Format:Print
| Language:English

Abstract

Export controls are a common instrument of national security, but their economic consequences are not well understood. This paper evaluates how these controls affect firm performance and adaptation in targeted countries. We use variation in a 2007 US policy, commonly called the “China Rule”, that restricted Chinese imports of products with military end-uses. We find a substantial, persistent decrease in Chinese imports of these products from the United States, which are not replaced by imports from the rest of the world. Exposed firms exhibit decreased profits and productivity. Furthermore, exposed firms show signs of adaptation: they are more likely to have positive R&D expenditures and more likely to hold any patent. However, firms do not appear to adapt by substituting to other import partners.

Keywords

National Security; Trade; Business and Government Relations; Policy; Performance Productivity; Adaptation

Citation

Liu, Xueyue, Yu Liu, and Jaya Y. Wen. "The Consequences of Export Controls in Target Countries." Harvard Business School Working Paper, No. 25-004, August 2024.