Max Planck Institute for Innovation and Competition, Munich, Room 313
This paper estimates the eﬀect of trade policy during the Great Liberalization of the 1990s on innovation in nearly 100 countries using international firm-level patent data. The empirical strategy exploits ex-ante diﬀerences in firms’ exposure to countries and industries, allowing us to construct firm-speciﬁc measures of tariff cuts. This provides a novel source of variation that enables us to establish the causal impact of trade policy on innovation. Our results suggest that trade liberalization has economically significant eﬀects on innovation and, ultimately, technical change and growth. According to our estimates, a substantial share of global knowledge creation during the 1990s can be explained by trade policy reforms. Furthermore, we find that the increase in patenting reflects innovation, rather than simply more protection of existing knowledge. Both improved market access and more import competition contribute to the positive innovation response to trade liberalization (joint work with Andreas Moxnes and Karen Helene Ulltveit-Moe).
Contact person: Laura Rosendahl Huber, Ph.D.