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Better, Faster, Stronger: Global Innovation and Trade Liberalization

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  • Federica Coelli
  • Andreas Moxnes
  • Karen Helene Ulltveit-Moe

Abstract

This paper estimates the effect of trade policy during the Great Liberalization of the 1990s on innovation in over 60 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 tariffs. This provides a 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, on technical change and growth. According to our estimates, about 7 percent of the increase in 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.

Suggested Citation

  • Federica Coelli & Andreas Moxnes & Karen Helene Ulltveit-Moe, 2016. "Better, Faster, Stronger: Global Innovation and Trade Liberalization," NBER Working Papers 22647, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22647
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    Cited by:

    1. Mandelman, Federico S. & Waddle, Andrea, 2020. "Intellectual property, tariffs, and international trade dynamics," Journal of Monetary Economics, Elsevier, vol. 109(C), pages 86-103.
    2. Vencappa, Dev & Stiebale, Joel, 2017. "Import Competition and Vertical Integration: Evidence from India," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168237, Verein für Socialpolitik / German Economic Association.
    3. Philippe Aghion & Antonin Bergeaud & Matthieu Lequien & Marc J. Melitz, 2018. "The Heterogeneous Impact of Market Size on Innovation: Evidence from French Firm-Level Exports," NBER Working Papers 24600, National Bureau of Economic Research, Inc.
    4. Kern, Milena & Paetzold, Joerg & Winner, Hannes, 2018. "Cutting Red Tape for Trade in Services," Working Papers in Economics 2018-9, University of Salzburg.
    5. Sophia Chen & Estelle Dauchy, 2018. "International Technology Sourcing and Knowledge Spillovers: Evidence from OECD Countries," IMF Working Papers 2018/051, International Monetary Fund.
    6. Ufuk Akcigit & Sina T. Ates & Giammario Impullitti, 2018. "Innovation and trade policy in a globalized world," CEP Discussion Papers dp1589, Centre for Economic Performance, LSE.
    7. Ronald B. Davies & Dieter F. Kogler & Ryan Hynes, 2020. "Patent Boxes and the Success Rate of Applications," CESifo Working Paper Series 8375, CESifo.
    8. Serrano, Javier & Myro, Rafael, 2019. "From domestic to exporter, what happens? Evidence for Spanish manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 380-392.
    9. Philippe Aghion, Antonin Bergeaud, Matthieu Lequien, Marc J. Melitz, 2018. "The Impact of Exports on Innovation: Theory and Evidence," Working papers 678, Banque de France.
    10. International Monetary Fund [IMF], 2018. "World Economic Outlook, April 2018: Cyclical Upswing, Structural Change," Working Papers id:12768, eSocialSciences.
    11. Pian Shu & Claudia Steinwender, 2019. "The Impact of Trade Liberalization on Firm Productivity and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 19(1), pages 39-68.
    12. Ronald B. Davies & Dieter F. Kogler & Ryan Hynes, 2020. "Patent Boxes and the Success Rate of Applications," CESifo Working Paper Series 8375, CESifo.
    13. Dechezleprêtre, Antoine & Hémous, David & olsen, morten & Zanella, carlo, 2019. "Automating Labor: Evidence from Firm-level Patent Data," CEPR Discussion Papers 14249, C.E.P.R. Discussion Papers.
    14. Li, Xiaogang, 2020. "Innovation, market valuations, policy uncertainty and trade: Theory and evidence," ISU General Staff Papers 202001010800009179, Iowa State University, Department of Economics.
    15. Liu, Qing & Ma, Hong, 2020. "Trade policy uncertainty and innovation: Firm level evidence from China’s WTO accession," Journal of International Economics, Elsevier, vol. 127(C).
    16. Johannes Eugster & Giang Ho & Florence Jaumotte & Roberto Piazza, 2018. "International Knowledge Spillovers," IMF Working Papers 2018/269, International Monetary Fund.
    17. Ana Cuadros & Jordi Paniagua & Antonio Navas, 2019. "Moving ideas across borders: Migrant inventors, patents and FDI," Working Papers 1904, Department of Applied Economics II, Universidad de Valencia.

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    More about this item

    JEL classification:

    • F0 - International Economics - - General
    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F6 - International Economics - - Economic Impacts of Globalization

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