The Review of Economics and Statistics
Federica Coelli, Andreas Moxnes, Karen Helene Ulltveit-Moe
Purpose of Measurement:
Understanding the Problem
This paper estimates the effect on innovation of increased market access facilitated by trade liberalization. A novel empirical design, which exploits tariff cuts during the 1990s, was used, along with detailed data on innovation among firms from 65 countries. The 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 industry-wide trends in innovation.