Trade Policy Uncertainty and Innovation: Evidence from China’s WTO Accession

Posted: 18 May 2021

See all articles by Qing Liu

Qing Liu

Renmin University of China

Hong Ma

Tsinghua University - School of Economics & Management

Date Written: September 5, 2020

Abstract

This study proposes a novel channel through which trade liberalization may induce innovationthrough the reduction of trade policy uncertainties (TPU) in destination markets. To verify thislinkage, we utilize the significant reduction of TPU engendered by China’s accession to theWorld Trade Organization (WTO) in 2001 as a quasi-natural experiment. Wefind that reduc-tion in TPU significantly encouragesfirms’patent application:firms in sectors with a larger re-duction in uncertaintyfiled more invention patent applications after China’s WTO accession.We alsofind thatfirms’innovation responses to TPU reduction vary by productivity, owner-ship, exporting status, and the irreversibility of investment.

Keywords: Trade Policy Uncertainty, Innovation, WTO Accession

JEL Classification: F13, F14, O31

Suggested Citation

Liu, Qing and Ma, Hong, Trade Policy Uncertainty and Innovation: Evidence from China’s WTO Accession (September 5, 2020). Journal of International Economics, Vol. 127, 2020, Available at SSRN: https://ssrn.com/abstract=3846028

Qing Liu (Contact Author)

Renmin University of China ( email )

Hong Ma

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

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