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

Pierce, Justin; Schott, Peter K.

doi:10.17016/feds.2017.120

Cited by 6 publications

(6 citation statements)

References 25 publications

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“…Furthermore, financially constrained firms experience substantial declines in annual sales when subject to tariff reductions. In line with Pierce and Schott (2018), we also find that market exit is more pronounced among financially constrained firms. Our estimates suggest that a tariff reduction for these firms is associated with a significant increase in the probability of leaving the market.…”

Section: Introductionsupporting

confidence: 91%

Innovation and trade in the presence of credit constraints

Föllmi

Legge

Tiemann

2021

Canadian J of Economics

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This paper examines how trade liberalization affects investments in R&D at the firm level. In a model where entrepreneurs are heterogeneous in their wealth endowment, they rely differently on external funds. In the presence of capital market imperfections, this implies heterogeneous access to external funds such that poor entrepreneurs run smaller firms, are less likely to invest in R&D, and more likely to exit the market. Decreasing trade costs resulting from tariff reductions exacerbate these characteristics. Using firm-level panel data on seven Latin American countries for 2006 and 2010, we find support for our theoretical predictions. While recent studies emphasize a positive impact of trade liberalization on firms' productivity-enhancing activities, we provide novel evidence showing that financial constraints can impair the effect on R&D efforts. To address potential endogeneity concerns, we verify our findings using external financial dependence based on U.S. firms. These results suggest that imperfect capital markets can prevent welfare gains from trade liberalization to materialize.

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Section: Introductionsupporting

confidence: 91%

Innovation and trade in the presence of credit constraints

Föllmi

Legge

Tiemann

2021

Canadian J of Economics

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“…One possible explanation for the baseline results is that high-gap industries were receiving higher de-facto protectionism from China via the uncertainty generated by the trade policy status. There is in fact evidence that these industries suffered in terms of employment and investment relatively more when the uncertainty was eliminated in 2001 (see Pierce and Schott (2016), Handley and Limão (2017) and Pierce and Schott (2018)). This would have translated into higher expected cash flows for high-gap sectors, and thus in higher average returns between 1990 and 2001.…”

Section: Protection From Chinamentioning

confidence: 99%

Trade Policy Uncertainty and Stock Returns

Bianconi

Esposito

Sammon³

2019

SSRN Journal

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We examine how trade policy uncertainty is reflected in stock returns. Our identification strategy exploits quasi-experimental variation in exposure to trade policy uncertainty arising from Congressional votes to revoke China's preferential tariff treatment between 1990 and 2001. More exposed industries commanded a risk premium of 6% per year.The risk premium was larger in sectors less protected from globalization, and more reliant on inputs from China. More exposed industries also had a larger drop in stock prices when the uncertainty began, and more volatile returns around key policy dates.Moreover, the effects of policy uncertainty on expected cash-flows, investors' forecast errors, and import competition from China cannot explain our results.

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“…Thus, the decrease in investment in enterprises whose products compete with Chinese goods coincides with the timing of the measure, but this had little impact on those companies that initially had a higher level of productivity and cost-effectiveness. The authors argue that this is due to the introduction of technical changes and other factors that lead to the creation of better products [Pierce, Schott, 2018]. These findings are of great interest for the current increase in American duties on Chinese goods and goods from a number of other countries.…”

Section: Resultsmentioning

confidence: 96%

Theoretical concepts of trade policy development and analysis: Evolution and modern challenges in the context of the international trading system transformation

Koval

Trofimenko²

2020

SUJES

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The study of the trade policy concepts within a framework of hyperglobalization and global regulation system transformation requires new theoretical and methodological approaches. On the one hand, trade policy design and implementation is closely linked to a wide range of issues from e-commerce to gender inequality. On the other hand, the newest trade theory focuses on studying the companies' export activities, their participation in global value chains and their trade costs. In addition, research methodology for various quantitative methods has grown significantly. An increasing number of papers deal with the analysis of specific trade policy instruments. However, despite the expanding number of studies on international trade and trade policy in the economic, political and legal fields, the interdisciplinary approach for a deeper understanding of the impact of specific measures on the countries socio-economic development has not yet been developed. The paper presents an integrative review of studies in leading foreign and Russian journals on international trade, as well as a comparative analysis of the identified research areas.

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

Cited by 6 publications

References 25 publications

Innovation and trade in the presence of credit constraints

Innovation and trade in the presence of credit constraints

Trade Policy Uncertainty and Stock Returns

Theoretical concepts of trade policy development and analysis: Evolution and modern challenges in the context of the international trading system transformation

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