Deep Trade Agreements and Heterogeneous Firms’ Exports

This paper studies the effect of regional trade agreements on firms' exports using detailed information on the content of trade agreements and firm-level exports for 31 developing countries between 2000 and 2020. Moving from shallow to deep trade agreements - i.e. agreements that regulate border and behind-the-border policies - boosts firms' exports, on average, by 3.6 percent. In line with models of trade with heterogeneous firms, this effect is stronger for large firms and firms involved in global value chains and (weakly) negative for small firms, suggesting a competition effect of deep trade agreements with significant welfare consequences for signatory countries. An Instrumental Variable strategy and a battery of robustness tests confirm the causal interpretation of the results.