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Variable Trade Costs, Composition Effects, and the Intensive Margin of Trade

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  • Lionel Fontagné
  • Antoine Berthou

Abstract

We estimate the elasticity of extra-EU French firm-level exports with respect to applied tariffs -- a variable trade cost. We propose a methodology controlling for unobserved firm characteristics driving selection in exports market and for the resistance terms. Results confirm a significant negative impact of tariffs on firm-level exports, with one fifth of this impact falling on the induced adjustment in the exporters' product mix. When controlling for this adjustment and focusing on the core exported products, the elasticity of the product-destination firm-level exports with respect to applied tariffs is estimated at about -2.5.

Suggested Citation

  • Lionel Fontagné & Antoine Berthou, 2015. "Variable Trade Costs, Composition Effects, and the Intensive Margin of Trade," Working Papers 2015-08, CEPII research center.
  • Handle: RePEc:cii:cepidt:2015-08
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    References listed on IDEAS

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    Cited by:

    1. Fontagné, Lionel & Orefice, Gianluca & Piermartini, Roberta & Rocha, Nadia, 2015. "Product standards and margins of trade: Firm-level evidence," Journal of International Economics, Elsevier, vol. 97(1), pages 29-44.
    2. Lionel Fontagné & Gianluca Orefice & Roberta Piermartini, 2020. "Making small firms happy? The heterogeneous effect of trade facilitation measures," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 565-598, August.
    3. Bas, Maria & Mayer, Thierry & Thoenig, Mathias, 2017. "From micro to macro: Demand, supply, and heterogeneity in the trade elasticity," Journal of International Economics, Elsevier, vol. 108(C), pages 1-19.
    4. Fontagné, Lionel & Martin, Philippe & Orefice, Gianluca, 2018. "The international elasticity puzzle is worse than you think," Journal of International Economics, Elsevier, vol. 115(C), pages 115-129.
    5. Clément Malgouyres & Thierry Mayer, 2018. "Exports and labor costs: evidence from a French policy," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(3), pages 429-454, August.
    6. Xu, Tongsheng & Li, Weiwei & Jiang, Yulian & Chen, Ya, 2020. "The impact of destination tariffs on China’s exports: Country, firm, and product perspectives," Journal of Asian Economics, Elsevier, vol. 71(C).
    7. Antoine BERTHOU & Jean-Stéphane MÉSONNIER & Guillaume HORNY, 2018. "Dollar funding and French exports to the United States: lessons from the 2011 dollar crunch," Rue de la Banque, Banque de France, issue 62, May.
    8. Erik Figueiredo & Luiz Renato Lima & Gianluca Orefice, 2016. "Third Country Effect of Migration: the Trade-Migration Nexus Revisited," Working Papers 2016-22, CEPII research center.
    9. Jafari, Yaghoob & Britz, Wolfgang, 2018. "Modelling heterogeneous firms and non-tariff measures in free trade agreements using Computable General Equilibrium," Economic Modelling, Elsevier, vol. 73(C), pages 279-294.
    10. Luca Salvatici & Silvia Nenci, 2017. "New features, forgotten costs and counterfactual gains of the international trading system," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 44(4), pages 592-633.
    11. Agnès Bénassy‐Quéré & Matthieu Bussière & Pauline Wibaux, 2021. "Trade and currency weapons," Review of International Economics, Wiley Blackwell, vol. 29(3), pages 487-510, August.
    12. Maria Cipollina & David Laborde Debucquet & Luca Salvatici, 2017. "The tide that does not raise all boats: an assessment of EU preferential trade policies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 199-231, February.
    13. Clément Malgouyres & Thierry Mayer, 2018. "Exports and labor costs: Evidence from a French Policy," Post-Print hal-03391928, HAL.
    14. Figueiredo, Erik & Lima, Luiz Renato & Orefice, Gianluca, 2020. "Migration, trade and spillover effects," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 405-421.
    15. Anis Khayati, 2019. "The Effects of Oil and Non-oil Exports on Economic Growth in Bahrain," International Journal of Energy Economics and Policy, Econjournals, vol. 9(3), pages 160-164.
    16. Bas, Maria & Mayer, Thierry & Thoenig, Mathias, 2017. "From micro to macro: Demand, supply, and heterogeneity in the trade elasticity," Journal of International Economics, Elsevier, vol. 108(C), pages 1-19.

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    More about this item

    Keywords

    international trade; firm heterogeneity; multi-product exporters; trade elasticity;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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