Abstract
We investigate how innovation affects rural nonfarm exports, and thus the U.S. trade deficit. Previous European studies indicate a positive link between R&D expenditures, patented innovation, and exports, but no comparable U.S. firm-level research exists. Using data from the Longitudinal Firm Trade Transactions Database and Annual Business Survey, we examine the relationship between innovation and exports for the United States. Employing a two-stage selection model to address endogeneity concerns, our findings suggest a significant connection between innovation and export. The study contributes to understanding the pivotal role of rural nonfarm exports and highlights policy implications for both trade and rural innovation.
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