Working Paper: NBER ID: w27510
Authors: Andrew N. Greenland; Mihai Ion; John W. Lopresti; Peter K. Schott
Abstract: We propose a method for identifying exposure to changes in trade policy based on asset prices that has several advantages over standard measures: it encompasses all avenues of exposure, it is natively firm-level, it yields estimates for both goods and service producers, and it can be used to study reductions in difficult-to-quantify non-tariff barriers in a way that controls naturally for broader macroeconomic shocks. Applying our method to two well-studied US trade liberalizations provides new insight into service sector responses to trade liberalizations as well as dramatically different responses among small versus large firms, even within narrow industries.
Keywords: Trade Liberalization; Equity Market Reactions; Abnormal Returns; Firm Performance
JEL Codes: E0; F13; F14; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| average abnormal returns (AARs) (C22) | growth in operating profits (O40) |
| average abnormal returns (AARs) (C22) | employment post-liberalization (J68) |
| higher average abnormal returns (AARs) (G17) | greater growth in operating profits (L21) |
| higher average abnormal returns (AARs) (G17) | greater growth in employment (J68) |
| increased exposure to trade liberalization (F69) | enhanced profitability (L21) |
| increased exposure to trade liberalization (F69) | enhanced employment outcomes (J68) |
| greater exposure to PNTR (F13) | lower stock returns during adverse events (G17) |