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Variable Trade Costs, Composition Effects and the Intensive Margin of Trade

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  • Antoine Berthou
  • Lionel Fontagné

Abstract

type="main" xml:id="twec12313-abs-0001"> We estimate the elasticity of extra EU French firm-level exports with respect to applied tariffs – a variable trade cost. We implement a method controlling for unobserved firm characteristics driving selection in exports market, and controlling for the multilateral resistance terms. Results confirm a significant negative impact of tariffs on firm-level exports, with one fifth of this impact falling on the induced adjustment in the exporters' product mix. When controlling for this adjustment and focusing on the core exported products, the elasticity of the product-destination firm-level exports with respect to applied tariffs is estimated at about −2.5.

Suggested Citation

  • Antoine Berthou & Lionel Fontagné, 2016. "Variable Trade Costs, Composition Effects and the Intensive Margin of Trade," The World Economy, Wiley Blackwell, vol. 39(1), pages 54-71, January.
    • Handle: RePEc:bla:worlde:v:39:y:2016:i:1:p:54-71
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    File URL: http://hdl.handle.net/10.1111/twec.2016.39.issue-1
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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