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Does input trade liberalization boost downstream firms’ exports? Theory and firm-level evidence

  • Chevassus-Lozza, Emmanuelle
  • Gaigne, Carl
  • Le Mener, Leo

We analyze the impact of input tariffs on the export status and export performance of processing firms. From a theoretical model with heterogeneous downstream firms, we show that lower input tariffs may increase the export sales of the high productivity firms at the expense of low productivity firms and may decrease the probability of firms entering foreign markets. We compare the predictions of the theoretical model with firm-level data from the French agrifood sector by developing a two-stage estimation procedure that uses an equation for selection into export markets in the first stage and an exports equation in the second stage. Liberalization of agricultural trade appears to favor the reallocation of market share from low to high productive firms. In addition, our result suggests that, whether lower input tariffs increase total exports sales and jobs, a large fraction of least productive exporting firms may lose from an additional decrease in agricultural product tariffs.

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Paper provided by Structure and Performance of Agriculture and Agri-products Industry (SPAA) in its series Working Papers with number 126946.

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Date of creation: Jan 2012
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Handle: RePEc:ags:spaawp:126946
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