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Investment responses to trade liberalization: Evidence from U.S. industries and establishments

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  • Pierce, Justin R.
  • Schott, Peter K.

Abstract

We examine the impact of trade liberalization on domestic investment in the U.S. manufacturing sector. Using a difference-in-differences identification strategy, we find that industries more exposed to an increase in import competition exhibit relative declines in investment. We find that establishment exit plays a key role in the investment adjustment, and that, along the intensive margin, the decline in investment is concentrated among establishments with low initial levels of labor productivity, capital intensity and skill intensity. Analysis of investment patterns before and after the liberalization suggests that, for certain establishments, investment activity is less lumpy following the policy change.

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  • Pierce, Justin R. & Schott, Peter K., 2018. "Investment responses to trade liberalization: Evidence from U.S. industries and establishments," Journal of International Economics, Elsevier, vol. 115(C), pages 203-222.
    • Handle: RePEc:eee:inecon:v:115:y:2018:i:c:p:203-222
    DOI: 10.1016/j.jinteco.2018.09.005
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    8. Liu, Qing & Ma, Hong, 2020. "Trade policy uncertainty and innovation: Firm level evidence from China’s WTO accession," Journal of International Economics, Elsevier, vol. 127(C).
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    More about this item

    Keywords

    Investment; Trade policy; Manufacturing; China; Normal trade relations; MFN;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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