Does Import Competition Force Efficient Production?

Increases in import competition led to large increases in labor productivity growth in highly concentrated industries during the period from 1975 through 1987. The finding is based on a panel of ninety-four manufacturing industries observed over four periods, each of three years duration. Imports had no observable effects on productivity growth in less concentrated industries; the strong effects in concentrated industries did not occur contemporaneously but appeared with a one-period lag. The effects are weakened but still statistically significant when Bureau of Labor Statistics productivity data are replaced by National Bureau of Economic Research data and in a larger panel with less precise trade data.