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

Justin Pierce () and Peter K. Schott

Journal of International Economics, 2018, vol. 115, issue C, 203-222

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.

Keywords: Investment; Trade policy; Manufacturing; China; Normal trade relations; MFN (search for similar items in EconPapers)
Date: 2018
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Chapter: Investment Responses to Trade Liberalization: Evidence from U.S. Industries and Establishments (2017)
Working Paper: Investment Responses to Trade Liberalization: Evidence from U.S. Industries and Establishments (2017) Downloads
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DOI: 10.1016/j.jinteco.2018.09.005

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