Investment Responses to Trade Liberalization: Evidence from U.S. Industries and Establishments∗

This paper examines the e ect of a change in U.S. trade policy on the domestic investment of U.S. manufacturers. Using a di erence-in-di erences identi cation strategy, we nd that industries more exposed to reductions in import tari uncertainty exhibit relative declines in investment after the change in trade policy. Within industries, we nd that this relationship is concentrated among establishments with low initial levels of labor productivity, capital intensity and skill intensity. For plants with high initial levels of skill intensity, we nd that increased exposure is associated with a relative increase in investment. We also nd evidence that establishments' investment activity is smoother following the policy change.