Antidumping protection and productivityof domestic firms: a firm-level analysis

We analyze the relationship between Antidumping (AD) Protection and the productivity ofEU domestic firms in import-competing industries. For this purpose we identify a panel ofdomestic firms between 1993 and 2003 that at some point during this period are affected byAD initiations. Using a difference-in-difference approach, we find that AD measures resultin improvements of measured productivity for domestic firms. Total Factor Productivity(TFP) of protected firms increases by 2% in the short-run and by 5% to 13% in the longrun.However, there is substantial heterogeneity across firms. The effect of protectiondepends on the initial “distance-to-the-frontier firm” in the industry. While protection raisesTFP of “laggard” domestic firms, it lowers TFP for “efficient” firms that operate close tothe efficiency frontier. These results are consistent with recent theoretical work supportingthe view that trade policy, under certain conditions, can induce technological catching-up.While this paper evaluates the effectiveness of AD policy it does not engage in a welfareanalysis....