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The reaction of French firms to the decrase of foreign tariffs

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Author Info

  • I. BUONO

    (Banca d'Italia)

  • G. LALANNE

    (Insee)

Abstract

We estimate the reaction of French firms to the drop in tariffs that has occurred in the late 1990s, mainly as a consequence of the Uruguay Round Agreement. To perform this estimation, we use data from the French customs and tariff rates provided by the TRAINS data base. Like in Buono and Lalanne (2009), we take advantage of the variations in tariffs over time. It allows us to exploit the panel structure of the data, which is not possible when using distance instead of tariffs. The results and the estimated reaction of firms to changes in variable export costs are strongly affected. From a cross-section, we find that the effect of tariffs on exports channels evenly through the number of exporting firms - the extensive margin - and through the exports per firm - the intensive margin. When using the panel structure, only the intensive margin reacts to tariff reductions. To understand what underlies this result, we study the role played by incumbent exporters. The latter are responsible for 95 % of the response of French exports to tariff reductions. Finally, we find that firms respond to these lower export costs by increasing their amounts exported by product rather than by exporting new products.

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File URL: http://www.insee.fr/fr/publications-et-services/docs_doc_travail/G2010-10.pdf
File Function: Document de travail de la DESE numéro G2010-10
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Bibliographic Info

Paper provided by Institut National de la Statistique et des Etudes Economiques, DESE in its series Documents de Travail de la DESE - Working Papers of the DESE with number g2010-10.

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Date of creation: 2010
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Handle: RePEc:crs:wpdeee:g2010-10

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Related research

Keywords: Tariffs; Trade margins; Uruguay Round;

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References

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  1. Matthieu Crozet & Pamina Koenig, 2007. "Structural gravity equations with intensive and extensive margins," EconomiX Working Papers 2007-36, University of Paris West - Nanterre la Défense, EconomiX.
  2. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  3. Jonathan Eaton & Marcela Eslava & Maurice Kugler & James Tybout, 2007. "Export Dynamics in Colombia: Firm-Level Evidence," NBER Working Papers 13531, National Bureau of Economic Research, Inc.
  4. Burger, M.J. & van Oort, F.G. & Linders, G.J.M., 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-Inflated Estimation," ERIM Report Series Research in Management ERS-2009-003-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  5. Boriss Siliverstovs & Dieter Schumacher, 2007. "Estimating Gravity Equations: To Log or Not to Log?," Discussion Papers of DIW Berlin 739, DIW Berlin, German Institute for Economic Research.
  6. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  7. I. Buono & G. Lalanne, 2009. "The Effect of the Uruguay round on the Intensive and Extensive Margins of Trade," Documents de Travail de la DESE - Working Papers of the DESE g2009-15, Institut National de la Statistique et des Etudes Economiques, DESE.
  8. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer, vol. 43(3), pages 135-148, May.
  9. Susan E. Feinberg & Michael P. Keane, 2009. "Tariff effects on MNC decisions to engage in intra-firm and arm's-length trade," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 900-929, August.
  10. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
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