Instrumental Variable Model: Using Tariffs as Instrument Sample Clauses

Instrumental Variable Model: Using Tariffs as Instrument. To address the potential endogeneity between and due to reverse causality, a 2- Staged Least Squares (2SLS) Instrumental Variable (IV) model was adopted, using the import tariffs imposed on Chinese goods as IV for . The first and second stage regressions are as follows: : = + + + + + : = ̂ + + + + + : = + + + + + where is the tariff rate imposed on Chinese imports faced by firm , in industry , in country . and are country-year and country-industry interaction variables, and is firm fixed effects. Standard errors are clustered at the country-industry level to satisfy SUTVA. For labour productivity variables that only use Thai firm data, the following IV model was used: : = + + + + : = ̂ + + + + : = + + + + Where ln represents the natural-log transformed productivity variables. and are firm and industry fixed effects. Standard errors are clustered at industry level. For both models, ̂ is the Chinese import shares were estimated based on the first stage regression. γ < 0 is expected as the cost of imports increases with higher tariffs and hence reduces the amount of imports.