K.U.Leuven - Departement toegepaste economische wetenschappen
DTEW Research Report 0441 pages:1-41
In this paper we provide empirical evidence that Antidumping (AD) Protection can induce technological catching-up by domestic firms affected by the import protection. We identify a panel of 1,793 import-competing domestic firms between 1993 and 2000, directly affected by AD cases that were initiated in 1996. Using a difference-in-difference approach, we find evidence of increased Total Factor Productivity (TFP) growth for firms protected by AD measures compared to firms that did not receive protection. However, our analysis indicates that the effect of protection depends on the 'distance to the frontier firm' in the industry. While protection raises TFP growth of 'laggard' firms, the reverse holds for domestic firms that are close to the efficiency frontier. These results confirm recent theoretical work supporting the view that protection can induce technological catching-up.