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The effect of the Uruguay round on the intensive and extensive margins of trade

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  • Buono, Ines
  • Lalanne, Guy

Abstract

Do tariffs inhibit trade flows by limiting the entry of exporters (‘firm extensive margin’) or by restricting the average volume exported by each firm (‘firm intensive margin’)? Using a gravity equation approach, we analyze how the decrease in tariffs promoted during the 90s by the Uruguay Round multilateral trade agreement affected the trade margins of French firms for 57 sectors and 147 countries from 1993 to 2002. Our main contribution is to estimate the elasticity of trade on both margins, controlling for the unobserved heterogeneity of trade flows thanks to a three-dimensional panel and to time-varying tariffs as a measure of variable trade costs. Our results show that the number of firms exporting in a given sector to a given destination is related to the level of tariffs. But they also show that the decrease in tariffs induced by the implementation of the Uruguay Round did not lead more firms to export and that it only induced incumbent exporters to increase their shipments. We control for two problems that may affect our basic specification: tariff changes may be endogenous and zero flows are not included. Our results are confirmed — even when the extensive margin is significant, its magnitude is very small.

Suggested Citation

  • Buono, Ines & Lalanne, Guy, 2012. "The effect of the Uruguay round on the intensive and extensive margins of trade," Journal of International Economics, Elsevier, vol. 86(2), pages 269-283.
  • Handle: RePEc:eee:inecon:v:86:y:2012:i:2:p:269-283 DOI: 10.1016/j.jinteco.2011.11.003
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    Cited by:

    1. Anne-Célia Disdier & Lionel Fontagné & Mondher Mimouni, 2015. "Tariff Liberalization and Trade Integration of Emerging Countries," Review of International Economics, Wiley Blackwell, vol. 23(5), pages 946-971, November.
    2. Lionel Fontagné & Jean Fouré, 2013. "Opening a Pandora's Box: Modelling World Trade Patterns at the 2035 Horizon," Working Papers 2013-22, CEPII research center.
    3. Handley, Kyle, 2014. "Exporting under trade policy uncertainty: Theory and evidence," Journal of International Economics, Elsevier, pages 50-66.
    4. Hayakawa, Kazunobu & Kimura, Fukunari & Laksanapanyakul, Nuttawut, 2016. "Firm-level trade creation and diversion of regional trade agreements in Thailand," IDE Discussion Papers 621, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. repec:bpj:glecon:v:17:y:2017:i:4:p:11:n:3 is not listed on IDEAS
    6. 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.
    7. Fontagné, Lionel & Orefice, Gianluca & Piermartini, Roberta & Rocha, Nadia, 2015. "Product standards and margins of trade: Firm-level evidence," Journal of International Economics, Elsevier, pages 29-44.
    8. KUNO Arata & URATA Shujiro & YOKOTA Kazuhiko, 2016. "Estimating the Impacts of FTA on Foreign Trade: An analysis of extensive and intensive trade margins for the Japan-Mexico FTA," Discussion papers 16003, Research Institute of Economy, Trade and Industry (RIETI).
    9. Nicita, Alessandro & Rollo, Valentina, 2015. "Market Access Conditions and Sub-Saharan Africa’s Exports Diversification," World Development, Elsevier, vol. 68(C), pages 254-263.
    10. Federico Ciliberto & Ina C. Jäkel, 2017. "Exporter Price Premia?," Economics Working Papers 2017-09, Department of Economics and Business Economics, Aarhus University.
    11. Avsar Veysel, 2017. "The Anatomy of Trade Deflection," Global Economy Journal, De Gruyter, pages 1-11.
    12. Dikova, Desislava & Jaklic, Andreja & Burger, Anze & Kuncic, Aljaz, 2014. "Export diversity or focus? What strategy is best for first-time internationalizing SMEs from an emerging market?," Working Papers/Institute for International Business 4171, WU Vienna University of Economics and Business.
      • Clive L. Spash & Hendrik Theine, 2016. "Voluntary Individual Carbon Trading," SRE-Disc sre-disc-2016_04, Institute for Multilevel Governance and Development, Department of Socioeconomics, Vienna University of Economics and Business.
    13. Lionel Fontagné & Gianluca Orefice & Roberta Piermartini & Nadia Rocha, 2015. "Product Standards and Margins of Trade: Firm-Level Evidence Product Standards and Margins of Trade: Firm-Level Evidence," PSE - Labex "OSE-Ouvrir la Science Economique" hal-01299757, HAL.
    14. Machado, José A.F. & Santos Silva, J.M.C. & Wei, Kehai, 2016. "Quantiles, corners, and the extensive margin of trade," European Economic Review, Elsevier, vol. 89(C), pages 73-84.
    15. Dikova, Desislava & Jaklic, Andreja & Burger, Anze & Kuncic, Aljaz, 2014. "Export diversity or focus? What strategy is best for first-time internationalizing SMEs from an emerging market?," Working Papers/Institute for International Business 4171, WU Vienna University of Economics and Business.
    16. I. Buono & G. Lalanne, 2010. "The reaction of French firms to the decrase of foreign tariffs," Documents de Travail de la DESE - Working Papers of the DESE g2010-10, Institut National de la Statistique et des Etudes Economiques, DESE.
    17. Spearot, Alan C., 2013. "Variable demand elasticities and tariff liberalization," Journal of International Economics, Elsevier, pages 26-41.

    More about this item

    Keywords

    Tariffs; Trade margins; Uruguay Round;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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