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Do Tariffs Matter for the Extensive Margin of International Trade? An Empirical Analysis

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  • Debaere, Peter
  • Mostashari, Shalah

Abstract

Explaining the strong growth of world trade with the relatively moderate tariff reductions since WW II is a quantitative challenge. The trade of new goods resulting from tariff reductions, it has been conjectured, might be the missing link. We investigate this hypothesis with very disaggregate trade and tariff data for US bilateral imports between 1989 and 2000. A probit analysis shows that changing tariffs and tariff preferences influence the extensive margin of countries' exports to the US in a statistically significant way. Tariff reductions give way to new goods' being traded, and tariff preferences reduce the extensive margin of trade for the excluded party. However, while we do find evidence of both trade creation and diversion on the extensive margin, our estimates show that country and industry specific factors are far more important than tariffs in explaining why countries start trading new goods and stop trading others.

Suggested Citation

  • Debaere, Peter & Mostashari, Shalah, 2005. "Do Tariffs Matter for the Extensive Margin of International Trade? An Empirical Analysis," CEPR Discussion Papers 5260, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5260
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Dennis, Allen & Shepherd, Ben, 2007. "Trade costs, barriers to entry, and export diversification in developing countries," Policy Research Working Paper Series 4368, The World Bank.
    2. Arnim, Rudi von & Taylor, Lance, 2007. "World Bank CGE Macroeconomics and the Doha Debate," Conference papers 331649, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Buono, Ines & Lalanne, Guy, 2012. "The effect of the Uruguay round on the intensive and extensive margins of trade," Journal of International Economics, Elsevier, vol. 86(2), pages 269-283.
    4. Mitik, Lulit & Decaluwé, Bernard, 2008. "The impact of trade on female labor and girls’ education in South Africa: a CGE analysis," Conference papers 331785, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Maria Persson, 2013. "Trade facilitation and the extensive margin," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(5), pages 658-693, August.
    6. 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.
    7. Christian Volpe Martincus & Sandra Milena Gómez, 2009. "Trade Policy and Export Diversification: What Should Colombia Expect from the FTA with the United States," IDB Publications (Working Papers) 9292, Inter-American Development Bank.
    8. Jan Van Hove, 2010. "Variety and quality in intra‐European manufacturing trade: the impact of innovation and technological spillovers," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(1), pages 43-59.
    9. Giancarlo Corsetti & Philippe Martin & Paolo Pesenti, 2008. "Varieties and the Transfer Problem: The Extensive Margin of Current Account Adjustment," RSCAS Working Papers 2008/01, European University Institute.
    10. Volpe Martincus, Christian & Gómez, Sandra Milena, 2009. "Trade Policy and Export Diversification: What Should Colombia Expect from the FTA with the United States," IDB Publications (Working Papers) 2498, Inter-American Development Bank.
    11. Roger Hosein & Rebecca Gookool & George Saridakis, 2021. "Trade Facilitation and Non-Energy Exports of Trinidad and Tobago," Sustainability, MDPI, vol. 13(5), pages 1-15, March.
    12. Michael Funke & Ralf Ruhwedel, 2008. "Trade, product variety and welfare: a quantitative assessment for mainland China," China Economic Journal, Taylor & Francis Journals, vol. 1(2), pages 203-212.
    13. Persson, Maria, 2008. "Trade Facilitation and the Extensive and Intensive Margins of Trade," Working Papers 2008:13, Lund University, Department of Economics.

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    Keywords

    International trade;

    JEL classification:

    • F1 - International Economics - - Trade

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