The impact of import barriers on firm performance: Evidence from Import Licenses in Argentina

In recent decades, the relative importance of non-tariff measures has increased as part of the countries' trade policy. In this paper, we study the impact of non-automatic import licenses (NAIL) on firms' performance. We use a comprehensive data of Argentinian firms between 2000 and 2011 and exploit exogenous variability in the timing of the import barriers imposed to Argentinian products. Not surprisingly, we find that trade barriers reduce imports for those firms that are more exposed to the policy. A firm at the fifty percentile of exposure to NAILS (15% of its imported inputs) reduce its total imports 7.5%. While larger firms are able to attenuate the impact by changing the bundle of inputs, smaller firms experience higher declines in amount of imports. The negative effect of NAILs on imports yields to a considerably decline in firms' total exports. A firm at the fifty percentile of exposure to NAILS reduce its exports in 5.5%. This implies that the elasticity of exports with respect to imports is 0.75. The negative impact of NAILs is relatively higher for exporters of differentiated goods to destinations outside the Mercosur and for smaller firms. Our results suggest that the application of non-technical barriers to imports made Argentinian firms less competitive in export markets.