Deep Trade Agreements and Heterogeneous Firms Exports

This paper studies the effect of regional trade agreements on firms’ exports. Using detailedinformation on the content of trade agreements and firm-level exports for 31 developing countries between 2000and 2020, the analysis shows that the depth of trade agreements matters for the export performance of firms.Moving from shallow to deep trade agreements boosts firms’ exports, on average, by 3.6 percent. In line with models oftrade with heterogeneous firms, the trade impact of deep trade agreements depends on firm’s characteristics. Theimpact is stronger for large firms and firms involved in global value chains and is negative for small firms.Robustness tests and an Instrumental Variable strategy confirm the causal interpretation of the results. Theseheterogeneous impacts on firms’ exports imply a selection effect of deep trade agreements with significant welfare consequences.