IDEAS home Printed from https://ideas.repec.org/p/amu/wpaper/2009-18.html
   My bibliography  Save this paper

Innovation Through Protection: Does Safeguard Protection Increase Investment in R and D?

Author

Listed:
  • Benjamin H. Liebman
  • Kara M. Reynolds

Abstract

We perform the first empirical study to focus on the relationship between trade protection and investment in Research and Development. Our results support predictions from the theoretical literature that temporary tariffs stimulate research and development, although we find no evidence that this effect diminishes as the termination of protection approaches as predicted by some theoretical models. We also find little evidence that quotas reduce research and development as predicted by multiple theoretical works. Finally, our results indicate that temporary tariffs result in decreased capital investment, perhaps because firms use periods of temporary protection to shutdown unprofitable facilities. This reveals an important distinction in firm behavior with regard to investment in tangible versus intangible capital during periods of trade protection.

Suggested Citation

  • Benjamin H. Liebman & Kara M. Reynolds, 2009. "Innovation Through Protection: Does Safeguard Protection Increase Investment in R and D?," Working Papers 2009-18, American University, Department of Economics.
  • Handle: RePEc:amu:wpaper:2009-18
    as

    Download full text from publisher

    File URL: https://drive.google.com/open?id=10W_u7-ENs_lBNuEAWbdyj7E7tPiY7cZd
    File Function: First version, 2009
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hartigan, James C & Perry, Philip R & Kamma, Sreenivas, 1986. "The Value of Administered Protection: A Capital Market Approach," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 610-617, November.
    2. Bester, Helmut & Petrakis, Emmanuel, 1993. "The incentives for cost reduction in a differentiated industry," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 519-534.
    3. Miyagiwa, Kaz & Ohno, Yuka, 1999. "Credibility of Protection and Incentives to Innovate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 143-163, February.
    4. Stephen Bond & Dietmar Harhoff & John Van Reenen, 2010. "Investment, R&D and Financial Constraints in Britain and Germany," NBER Chapters,in: Contributions in Memory of Zvi Griliches, pages 433-460 National Bureau of Economic Research, Inc.
    5. Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257.
    6. Celia Costa Cabral & Praveen Kujal & Emmanuel Petrakis, 1998. "Incentives for Cost Reducing Innovations under Quantitative Import Restraints," Annals of Economics and Statistics, GENES, issue 49-50, pages 479-493.
    7. Lenway, Stefanie & Morck, Randall & Yeung, Bernard, 1996. "Rent Seeking, Protectionism and Innovation in the American Steel Industry," Economic Journal, Royal Economic Society, vol. 106(435), pages 410-421, March.
    8. Mark Funk, 2003. "The Effects of Trade on Research and Development," Open Economies Review, Springer, vol. 14(1), pages 29-42, January.
    9. repec:adr:anecst:y:1998:i:49-50:p:17 is not listed on IDEAS
    10. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    11. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    12. Aaron Tornell, 1997. "Rational Atrophy: The U.S. Steel Industry," Harvard Institute of Economic Research Working Papers 1806, Harvard - Institute of Economic Research.
    13. Bronwyn H. Hall & John van Reenen, 1999. "How Effective are Fiscal Incentives for R&D? A New Review of the Evidence," NBER Working Papers 7098, National Bureau of Economic Research, Inc.
    14. Joachim Zietz & Bichaka Fayissa, 1992. "R & D expenditures and import competition: Some evidence for the U.S," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 128(1), pages 52-66, March.
    15. repec:adr:anecst:y:1998:i:49-50:p:18 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Research and Development; Strategic Protection;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:amu:wpaper:2009-18. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Meal). General contact details of provider: http://www.american.edu/cas/economics/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.