Trade and Investment under Policy Uncertainty: Theory and Firm Evidence
Kyle Handley and Nuno Limão
,
4
(
7
)
American Economic Journal: Economic Policy
189-222
November
2015
tpu_final.pdf622.65 KB
Abstract
Using a dynamic, heterogeneous firms model with sunk costs of exporting we show that: (i) investment and entry into export markets is reduced when trade policy is uncertain and (ii) credible preferential trade agreements (PTAs) increase trade even if applied trade barriers are currently low.
