Investment Responses to Trade Liberalization: Evidence from U.S. Industries and Plants

33 Pages Posted: 19 Dec 2017

See all articles by Justin R. Pierce

Justin R. Pierce

Board of Governors of the Federal Reserve System

Peter K. Schott

Yale University - School of Management; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Date Written: November 2017

Abstract

This paper examines the effect of a change in U.S. trade policy on the domestic investment of U.S. manufacturers. Using a difference-in-differences identification strategy, we find that industries more exposed to reductions in import tariff uncertainty exhibit relative declines in investment after the change in trade policy. Within industries, we find that this relationship is concentrated among establishments with low initial levels of labor productivity, capital intensity and skill intensity. Plants with high initial levels of skill intensity, by contrast, exhibit relative increases in investment with exposure. We also find evidence that establishments' investment activity is smoother following the policy change.

Suggested Citation

Pierce, Justin R. and Schott, Peter K., Investment Responses to Trade Liberalization: Evidence from U.S. Industries and Plants (November 2017). NBER Working Paper No. w24071, Available at SSRN: https://ssrn.com/abstract=3089507

Justin R. Pierce (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.justinrpierce.com/

Peter K. Schott

Yale University - School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-436-4260 (Phone)
203-436-6974 (Fax)

HOME PAGE: http://www.som.yale.edu/faculty/pks4

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
4
Abstract Views
228
PlumX Metrics