Trade in the time of COVID-19: an empirical analysis based on Italian data

This study aims to analyze the impact of the COVID-19 pandemic on international trade. To do so, we used a new panel database that included information on imports and exports at the firm, product, country, year, and month level for the entire population of Italian trading firms. We merged it with additional data sources that provided further details on the characteristics of firms and on the lockdown stringency and death rate of COVID-19, both in foreign countries and Italian provinces. After presenting a descriptive analysis, we identified how the pandemic in foreign countries affected Italian firms’ international trade; our results suggest that the impact on imports and exports was significant during the first wave, mainly driven by the stringency of the restrictions rather than by the death rate of COVID-19. Second, we analyzed how the local containment policies implemented by the Italian authorities affected trade flows and found that their effect was not significant. Finally, we showed that the varieties that were traded less intensively had a higher probability of being dropped in the aftermath of the COVID-19 crisis and those that were displaced in 2020 had a higher probability of not being traded one year later. This suggests that the pandemic affected the set of varieties traded by Italian firms and that its effects on the composition of imports and exports might be non-transitory.