Graduation Year

2026

Date of Submission

12-2025

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

William Lincoln

Abstract

There has been substantial debate within the economics profession on the impact of tariffs and free-trade agreements on productivity and innovation. I add to this debate by exploring how import tariff reductions after the signing of the North American Free Trade Agreement (NAFTA) in 1994 impacted US manufacturers’ patenting behavior. Using data on import tariffs from 1989 to 1999 and US manufacturing firm-level data, I construct a panel data set with 2,681 unique firms. I run OLS, Poisson, and Negative Binomial Models of patent counts on tariff rates while including firm and year fixed effects. In the full sample, I estimate a positive but insignificant coefficient, suggesting that patenting and tariff rates move together or are unrelated. When I split the sample into border and non-border locations, I find statistically significant results for border states: a 1 percentage point increase in tariff rates induces 2.7 more patents (P< 0.05). When focusing on high-productivity firms by restricting attention to firms with a high sales/employee ratio, I find insignificant but opposing results, suggesting that productive firms patent more when the tariffs decrease. Overall, the insignificance of the results across specifications suggests that lower import tariff rates under NAFTA have little-to-no relation to changes in firm-level patenting behavior, except perhaps in border states.

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