Working Paper: NBER ID: w24071
Authors: Justin R. Pierce; Peter K. Schott
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.
Keywords: Investment; Trade Liberalization; Manufacturing; US Economy
JEL Codes: E22; F1; F13; F14; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exposure to PNTR (F13) | investment decline (low productivity) (O49) |
| exposure to PNTR (F13) | investment increase (high productivity) (E22) |
| larger reductions in tariff rate uncertainty (F12) | smoother investment activity (G24) |
| implementation of PNTR (F13) | timing of investment declines (G11) |