Antidumping Protection and Productivity of Domestic Firms : A firm level analysis
We analyze the relationship between Antidumping (AD) Protection and the productivity of EU domestic firms in import-competing industries. For this purpose we identify a panel of domestic firms between 1993 and 2003 that a some point during this period are affected by AD initiations. Using a difference-in-difference approach, we find that AD measures result in improvements of measured productivity for domestic firms. Total Factor Productivity (TFP) of protected firms increases by 2% in the short-run and by 5% to 13% in the long-run. However, there is substantial heterogeneity across firms. The effect of protection depends on the initial â€œdistance-to-the-frontier firmâ€ in the industry. While protection raises TFP of â€œlaggardâ€ domestic firms, it lowers TFP for â€œefficientâ€ firms that operate close to the efficiency frontier. These results are consistent with recent theoretical work supporting the view that trade policy, under certain conditions, can induce technological catching-up. While this paper evaluates the effectiveness of AD policy it does not engage in a welfare analysis.
|Date of creation:||01 Sep 2007|
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