Defensive Innovation: Technological Rivalry and College Major Choice
Abstract:
This paper studies the responses of students’ college major choices to trade tensions in the context of the U.S.-China trade war. By analyzing granular college admissions data, we find that the U.S. tariffs targeting China’s high-tech industries unexpectedly raised admission scores for STEM majors. A 1 percentage point increase in the weighted average tariff correlates with a 2% to 3% rise in standardized admission scores, particularly for engineering disciplines and elite universities.
This phenomenon results from the “defensive innovation”, where increased government support and private innovation investments in affected industries lead to greater demand for high-skilled workers.
As U.S. tariffs rose, Chinese firms received more subsidies, enabling them to offer higher wages and more R&D related job opportunities, which incentivized students to pursue majors critical to the development of key strategic industries.