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Using the new products margin to predict the industry-level impact of trade reform


  • Kehoe, Timothy J.
  • Rossbach, Jack
  • Ruhl, Kim J.


This paper develops a methodology for predicting the impact of trade liberalization on exports by industry (3-digit ISIC) based on the pre-liberalization distribution of exports by product (5-digit SITC). We evaluate the ability of our methodology to account for the industry-level variation in export growth by using our model to “predict” the growth in industry trade from the North American Free Trade Agreement (NAFTA). We show that our method performs significantly better than the applied general equilibrium models originally used for the policy evaluation of NAFTA. We find that the most important products in our analysis are not the ones with zero pre-liberalization trade, but those with positive, yet small amounts of pre-liberalization trade.

Suggested Citation

  • Kehoe, Timothy J. & Rossbach, Jack & Ruhl, Kim J., 2015. "Using the new products margin to predict the industry-level impact of trade reform," Journal of International Economics, Elsevier, vol. 96(2), pages 289-297.
  • Handle: RePEc:eee:inecon:v:96:y:2015:i:2:p:289-297 DOI: 10.1016/j.jinteco.2015.03.004

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    References listed on IDEAS

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    2. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    3. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 358-392.
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    Cited by:

    1. repec:eee:ecmode:v:64:y:2017:i:c:p:365-383 is not listed on IDEAS
    2. Scott L. Baier & Yoto V. Yotov & Thomas Zylkin, 2016. "On the Widely Differing Effects of Free Trade Agreements: Lessons from Twenty Years of Trade Integration," CESifo Working Paper Series 6174, CESifo Group Munich.

    More about this item


    Trade liberalization; Industry; Product;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation


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