Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin

Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin

We evaluate the impact of trade liberalization on the intensive margin of the firm’s investment in foreign capital goods. To do so, we use Indian firm-level panel data from a period of a large-scale trade liberalization (1989–1997) to estimate an investment equation using the system-GMM estimator. I...

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Bibliographic Details
Main Authors: Kandilov, Ivan T., Leblebicioglu, Asli, Manghnani, Ruchita
Format: Journal Article
Published: Taylor and Francis 2022
Subjects:
TRADE LIBERALIZATION
TRADE FINANCE
FOREIGN INVESTMENT
FOREIGN CAPITAL GOODS
TARIFFS
Online Access:http://hdl.handle.net/10986/36812
id okr-10986-36812
recordtype oai_dc
spelling okr-10986-368122022-01-28T16:10:55Z Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin Kandilov, Ivan T. Leblebicioglu, Asli Manghnani, Ruchita TRADE LIBERALIZATION TRADE FINANCE FOREIGN INVESTMENT FOREIGN CAPITAL GOODS TARIFFS We evaluate the impact of trade liberalization on the intensive margin of the firm’s investment in foreign capital goods. To do so, we use Indian firm-level panel data from a period of a large-scale trade liberalization (1989–1997) to estimate an investment equation using the system-GMM estimator. Importantly, we control separately for the tariffs on capital goods, intermediate inputs and final goods, which allows us to estimate the price elasticity of investment in foreign capital goods. Consistent with theory, we find that reductions in the tariffs on capital goods, and intermediate inputs led to higher investment in foreign capital goods, whereas reduction in the output tariff resulted in lower investment. The impact of the capital goods tariffs is the largest. 2022-01-11T19:39:54Z 2022-01-11T19:39:54Z 2021 Journal Article Emerging Markets Finance and Trade 1540-496X http://hdl.handle.net/10986/36812 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Taylor and Francis Publications & Research Publications & Research :: Journal Article
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
topic TRADE LIBERALIZATION
TRADE FINANCE
FOREIGN INVESTMENT
FOREIGN CAPITAL GOODS
TARIFFS
spellingShingle TRADE LIBERALIZATION
TRADE FINANCE
FOREIGN INVESTMENT
FOREIGN CAPITAL GOODS
TARIFFS
Kandilov, Ivan T.
Leblebicioglu, Asli
Manghnani, Ruchita
Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin
description We evaluate the impact of trade liberalization on the intensive margin of the firm’s investment in foreign capital goods. To do so, we use Indian firm-level panel data from a period of a large-scale trade liberalization (1989–1997) to estimate an investment equation using the system-GMM estimator. Importantly, we control separately for the tariffs on capital goods, intermediate inputs and final goods, which allows us to estimate the price elasticity of investment in foreign capital goods. Consistent with theory, we find that reductions in the tariffs on capital goods, and intermediate inputs led to higher investment in foreign capital goods, whereas reduction in the output tariff resulted in lower investment. The impact of the capital goods tariffs is the largest.
format Journal Article
author Kandilov, Ivan T.
Leblebicioglu, Asli
Manghnani, Ruchita
author_facet Kandilov, Ivan T.
Leblebicioglu, Asli
Manghnani, Ruchita
author_sort Kandilov, Ivan T.
title Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin
title_short Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin
title_full Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin
title_fullStr Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin
title_full_unstemmed Trade Liberalization and Investment in Foreign Capital Goods : A Look at the Intensive Margin
title_sort trade liberalization and investment in foreign capital goods : a look at the intensive margin
publisher Taylor and Francis
publishDate 2022
url http://hdl.handle.net/10986/36812
_version_ 1764485944915787776

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