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Handley and Limão find trade policy uncertainty reduces firm investment and trade.

The Claim

In a 2017 publication, Kyle Handley and Nuno Limão argue that policy uncertainty suppresses trade and investment planning.

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The Short Version

The 2017 AER publication supports the claim’s substance. Handley and Limão argue that trade policy uncertainty reduces firms’ investment decisions such as export entry and technology upgrading, which in turn reduces trade flows. The wording “investment planning” is somewhat broader than the paper’s technical language, but it does not materially misstate the argument.

Caveats

  • The paper is specifically about trade policy uncertainty, not uncertainty in all policy domains.
  • “Investment planning” is a broad paraphrase; the paper’s evidence centers on export-entry and technology-upgrading investments.
  • The 2017 article was not the first appearance of this argument; related working papers and a 2015 journal article developed it earlier.

The Receipts

  1. Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States

    American Economic Review

  2. Trade and Investment under Policy Uncertainty: Theory and Firm Evidence

    American Economic Journal: Economic Policy

  3. Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S.

    National Bureau of Economic Research

  4. Trade Policy Uncertainty

    NBER Working Paper

  5. Trade and Investment under Policy Uncertainty: Theory and Firm Evidence

    University of Maryland Economics

  6. Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S.

    NBER Working Paper

  7. Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S.

    University of Maryland Department of Economics

  8. Trade and Investment under Policy Uncertainty: Theory and Firm Evidence

    RePEc (Research Papers in Economics)

  9. Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S

    RePEc: Research Papers in Economics

  10. Trade and Investment under Policy Uncertainty: Theory and Firm Evidence

    Centre for Economic Policy Research

+ 1 more sources — see the full list on Lenz

Filed Under

Kyle HandleyNuno M. Limão