Innovation Through Protection: Does Safeguard Protection Increase Investment in R and D?

Benjamin Liebman and Kara Reynolds

No 2009-18, Working Papers from American University, Department of Economics

Abstract: We perform the first empirical study to focus on the relationship between trade protection and investment in Research and Development. Our results support predictions from the theoretical literature that temporary tariffs stimulate research and development, although we find no evidence that this effect diminishes as the termination of protection approaches as predicted by some theoretical models. We also find little evidence that quotas reduce research and development as predicted by multiple theoretical works. Finally, our results indicate that temporary tariffs result in decreased capital investment, perhaps because firms use periods of temporary protection to shutdown unprofitable facilities. This reveals an important distinction in firm behavior with regard to investment in tangible versus intangible capital during periods of trade protection.

Keywords: Research and Development; Strategic Protection (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-int and nep-pke
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https://doi.org/10.17606/q6hv-mg39 First version, 2009 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:amu:wpaper:2009-18

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