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Trade Liberalization and Import Margins

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  • Richard Frensch

Abstract

Trade policy has well-documented effects on trade volumes. Reaching beyond volumes, I explore the effect of European emerging economies' recent institutional trade liberalization on extensive (i.e., the set of imported goods) versus intensive import margins (volumes per imported good) with highly disaggregated data. Differentiating goods categories by use, I find robust evidence of stronger extensive import margin effects of liberalization for intermediate and capital goods compared to consumer goods. This identifies an important channel for the link between reforms and growth in transition. The results also support new models of heterogeneous firms and trade, which predict that extensive import margin effects of a country's institutional trade liberalization should—through lowering fixed costs for rest-of-the-world exporters—increase with decreasing substitutability among products.

Suggested Citation

  • Richard Frensch, 2010. "Trade Liberalization and Import Margins," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(3), pages 4-22, May.
  • Handle: RePEc:mes:emfitr:v:46:y:2010:i:3:p:4-22
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    References listed on IDEAS

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    Cited by:

    1. Richard Frensch & Jan Hanousek & Evžen Kocenda, 2012. "Incomplete specialization and offshoring across Europe," FIW Working Paper series 091, FIW.
    2. Richard Frensch & Jan Hanousek & Evzen Kocenda, 2016. "Trade in Parts and Components across Europe," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(3), pages 236-262, June.
    3. Richard Frensch & Jan Hanousek & Evžen Kočenda, 2012. "Specialization, gravity, and European trade in final goods," Working Papers 320, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    4. Hanousek, Jan & Kocenda, Evzen & Maurel, Mathilde, 2011. "Direct and indirect effects of FDI in emerging European markets: A survey and meta-analysis," Economic Systems, Elsevier, vol. 35(3), pages 301-322, September.
    5. Andrea Beltramello & Koen De Backer & Laurent Moussiegt, 2012. "The Export Performance of Countries within Global Value Chains (GVCs)," OECD Science, Technology and Industry Working Papers 2012/2, OECD Publishing.
    6. Bin Qiu & Kuntal K. Das & W. Robert Reed, 2016. "The Effect of Exchange Rates on Chinese Trade: A Dual Margin Approach," Working Papers in Economics 16/17, University of Canterbury, Department of Economics and Finance.
    7. Christodoulopoulou, Styliani, 2010. "THE Effects of Multilateral Trade Liberalization on the Extensive and the Intensive Margins of Trade," MPRA Paper 29169, University Library of Munich, Germany.
    8. Foster, Neil & Poeschl, Johannes & Stehrer, Robert, 2011. "The impact of Preferential Trade Agreements on the margins of international trade," Economic Systems, Elsevier, vol. 35(1), pages 84-97, March.
    9. Ainura Uzagalieva & Evžen Kocenda & Antonio Menezes, 2012. "Technological Innovation in New EU Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(5), pages 48-65, September.
    10. Katharina Eck, 2009. "Decomposing a decade's growth of Central and Eastern Europe's trade," Memoranda - Policy Papers 40, Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    11. Richard Frensch, 2010. "European trade in parts and components : searching (for a trade model for searching) for offshoring evidence," Working Papers 280, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    12. Neil Foster, 2012. "Preferential Trade Agreements and the Margins of Imports," Open Economies Review, Springer, vol. 23(5), pages 869-889, November.
    13. Hanousek, Jan & Kočenda, Evžen, 2014. "Factors of trade in Europe," Economic Systems, Elsevier, vol. 38(4), pages 518-535.
    14. Giulia Bettin & Alessia Lo Turco, 2012. "A Cross-Country View on South-North Migration and Trade: Dissecting the Channels," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(4), pages 4-29, July.
    15. Ainura Uzagalieva & Evžen Kocenda & Antonio Menezes, 2012. "Technological Innovation in New EU Markets," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 48(5), pages 48-65, September.
    16. Giulia Bettin & Alessia Lo Turco, 2012. "A Cross-Country View on South-North Migration and Trade: Dissecting the Channels," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 48(4), pages 4-29, July.
    17. Goran Petrevski & Jane Bogoev & Bruno Sergi, 2012. "The link between central bank independence and inflation in Central and Eastern Europe: are the results sensitive to endogeneity issue omitted dynamics and subjectivity bias?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 34(4), pages 611-652.

    More about this item

    Keywords

    gravity; product variety; trade liberalization;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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