IBS Lunchtime Research Seminar - Effects of Trade Barriers on Foreign Direct Investment: Evidence From Chinese Solar Panels

You are cordially invited to attend an International Business and Strategy Departmental Research Meeting, during which there will be a presentation by Oriana Montti, Visiting PhD Student. A reminder that attendance for IBS (full time, research oriented) staff and full-time students is compulsory, and where possible, must be in person. Individuals unable to attend in person, due to legitimate reasons will be provided a Teams link on request. Non-IBS staff are welcome to attend, but must register prior to the event. If you have not received the email invite please email Angie Clark

Please join us in Room 108, Henley Business School, if you would like to attend, please register using the link below:

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Please make sure you let me know in advance if you intend to attend in person so that the correct amount of catering is booked.

Date: Wednesday 31st January 2024, HBS Room 108

Time: 13.00 - 14.15 pm

Abstract:

The recent comeback of protectionism and industrial policy will affect the international allocation of resources beyond the short run. Analyzing similar events from the past can help us envision their long-lasting effects. What are some unintended consequences of trade barriers in strategic economic sectors? I study the anti-dumping and countervailing Duties (AD-CVD) implemented by the Obama Administration in 2012 against the imports of solar panels from China. Leveraging the variation given by the policy's discriminatory nature, which assigns differential rates to Chinese firms in the same industry, I develop a difference-in-differences design. I estimate the effect on Foreign Direct Investment (FDI) decisions by Chinese firms using a Poisson Pseudo-Maximum Likelihood method and data on FDI announcements from 2009 to 2015. My findings show that in 2012, targeted firms increase FDI by 145 million dollars per year, from a previous average of 9 million dollars. These results for greenfield investment do not carry over to cross-border mergers and acquisitions. I find a reduction in the number of projects of 50% in 2013 and 2014. I use location choice models to test different hypotheses for FDI location. I find evidence of production fragmentation in Asia after the imposition of the duties, mostly to countries that end up becoming exporters of solar panels to the US, showing support for the export-platform hypothesis. These results document FDI diversion that modifies investment patterns in the short run and eludes the trade barriers in the medium run, weakening the intended effects of the protectionist policy.