Job Market Paper
Trade Policy Uncertainty and Innovation: Evidence from China
View the latest version (10-2018)
I study the effect of policy uncertainty on innovation. To establish causality, I exploit a change in US trade policy towards China, the conferral of Permanent Normal Trade Relations (PNTR), which eliminated a major source of trade policy uncertainty. I combine two key insights from the trade and the real option literature: market size matters for innovation; uncertainty generates an option value of waiting which delays investment. I show that the role played by trade policy uncertainty is complementary to the role played by the level of protection, and test this mechanism by studying the response of Chinese industries to the transition from annual to Permanent Normal Trade Relations. The difference between ex-ante-established worst-case scenario and actually applied tariffs generates heterogeneous exposure to uncertainty. Using a triple difference-in-differences, I find that reducing policy uncertainty increases innovation in highly exposed industries. Increased export revenues drive the result, suggesting that reducing trade policy uncertainty induced firms to both export and invest in new technologies.
Better, Faster, Stronger: Global Innovation and Trade Liberalization
View the latest version (05/2018). R&R Review of Economics and Statistics
This paper estimates the effect on innovation of increased market access facilitated by multilateral trade agreements – the World Trade Organization (WTO) and its predecessor the General Agreement on Tariffs and Trade (GATT). We use a novel empirical design that exploits Most Favored Nation (MFN) tariff cuts in the aftermath of the Uruguay Round, along with detailed data on innovation among firms from over 100 different countries. Our results reveal a large effect of tariff cuts on innovation as measured by patent data, suggesting that multilateral liberalization has promoted innovation and growth. These effects are not driven by the deterioration of innovation quality, and the results are robust to controlling for changes in the patent system and to industry-wide trends in innovation.
Work in progress
Evaluating output based allocation of pollution permits using a free permit rule (2016)
Is Productivity Growth Shared in a Globalized Economy? (with Aqib Aslam, Johannes Eugster, Giang Ho, Florence Jaumotte, Carolina Osorio Buitron, and Roberto Piazza)
in (ed) International Monetary Fund. 2018. World Economic Outlook: Cyclical Upswing, Structural Change. Chapter 4. Washington, DC, April
The impact of floods on firms’ performance (with Paolo Manasse)
Quaderni – Working Paper DSE, No. 946, 2014
Financial Times Let knowledge spread around the world