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

Justin Pierce () and Peter Schott ()

No 24071, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E22 F1 F13 F14 F4 (search for similar items in EconPapers)
Date: 2017-11
New Economics Papers: this item is included in nep-int, nep-mac and nep-tid
Note: IFM ITI
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