Better, Faster, Stronger: Global Innovation and Trade Liberalization (2022) with Andreas Moxnes and Karen Helene Ulltveit-Moe

Review of Economics and Statistics 104(2), 205-216.

[WP version] [Online Appendix

Media coverage: VoxEU

This paper estimates the effect on innovation of increased market access facilitated by trade liberalization. We use a novel empirical design that exploits tariff cuts during the 1990s, along with detailed data on innovation among firms from 65 different countries. Our results reveal a large effect of tariff cuts on innovation as measured by patent data, suggesting that multilateral liberalization has promoted innovation and growth. These effects are not driven by the deterioration of innovation quality, and the results are robust to controlling for changes in the patent system and to industry-wide trends in innovation.

Working papers

Trade Policy Uncertainty and Innovation: Evidence from China

R&R Journal of International Economics

This paper studies the effect of resolving trade policy uncertainty on investment in innovation in China during 1990-2007. It exploits exogenous and heterogeneous exposure to tariff uncertainty resolution arising from a major change in US trade policy, which eliminated the possibility of tariff increases on Chinese imported goods, and detailed data on innovation from all sectors and countries in a triple difference-in-differences. Eliminating tariff uncertainty has an economically and statistically significant effect on innovation, and this effect represents actual innovation, rather than just more patent filings. Next, the paper studies the mechanisms that led to this positive innovation response and shows i. that the increase in innovation reflects a response on three margins: the introduction of patents in new technologies, patens with increased technological scope, and patents in a firm’s pre-period technology portfolio; ii. that relatively more exposed sectors exhibit a larger increase in the number of firms patenting for the first time; iii. that the increase in innovation is at least in part driven by exports to the US.

Educating like China (with Difei Ouyan, Weidi Yuan, and Yuan Zi)

This paper presents novel empirical evidence that human capital accumulation leads to structural transformation. We identify this effect by studying a large and unforeseen higher education expansion initiative in China, which increased the relative supply of skilled labor. We exploit geographical variation in the magnitude of the expansion and an instrumental variable approach to estimate the causal effect of increased human capital supply on sectoral employment and value-added shares. We find that the higher education expansion increases the skill share in highly exposed regions, and leads to a reallocation of labor from agriculture to services. This reallocation is driven by both high-skill and low-skill workers moving to services. Additionally, highly exposed regions experience a reallocation of output from secondary to service sectors, indicating that they are shifting more rapidly towards a service-oriented economy. Through a decomposition of the service sector, we demonstrate that producer services are responsible for roughly one-third of the shift in labor towards the service sector. Finally, despite a shift toward a service-based economy, regions highly exposed to the higher education expansion exhibit lower per capita income growth.

Local booms and innovation (with Paul Pelzl)

Using oil and gas shocks as exogenous source of local business cycles in U.S. commuting zones, we provide novel evidence that innovation responds very locally to economic booms. Total patenting is procyclical, which we show to be driven by positive agglomeration economies. In contrast, patenting in oil and gas technology – the sector most closely linked to the boom – is countercyclical, consistent with larger opportunity costs of innovation when an industry is booming. These findings shed new light on the spatial dimension of innovation, inform the recent policy debate on local industrial policy, and help explain the mixed evidence on the cyclicality of innovation.

Better connected? Market integration and inventor networks (with Andreas Moxnes and Karen Helene Ulltveit-Moe)

Economic integration is recognized as an important driver of knowledge diffusion. However, we still have little direct evidence on the mechanisms that allow economic integration to have such a benign impact. Motivated by the fact that collaboration increasingly dominates knowledge production and that inventors’ interactions play an important role in human capital formation and productivity growth, we use global patent data to investigate the role of economic integration. We measure inventors’ innovation output, track inventors across teams and firms, and estimate the role of reducing interaction costs through labor market integration on the number and quality of inventors’ connections, and thus on knowledge diffusion. The Maastricht Treaty marked a milestone in 1993 as it established the EU and EU citizenship securing the free mobility of people and workers across EU member countries, and is an ideal natural experiment. We use a difference-in-difference strategy and compare inventors based in EU 15 countries to inventors based in the US. Our results reveal a positive and significant effect of the European integration on the number and quality of connections, which is robust to global industry trends and to region-industry-specific characteristics and linear trends.

Work in progress

Automation and Employment (with David Dorn, David Hemous, and Morten Olsen)



Is Productivity Growth Shared in a Globalized Economy? with Aqib Aslam, Johannes Eugster, Giang Ho, Florence Jaumotte, Carolina Osorio Buitron, and Roberto Piazza.

in (ed) International Monetary Fund. 2018. World Economic Outlook: Cyclical Upswing, Structural Change. Chapter 4. Washington, DC, April

Media coverage: Financial Times