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Variable Trade Costs, Composition Effects and the Intensive Margin of Trade
Author(s) -
Berthou Antoine,
Fontagné Lionel
Publication year - 2016
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12313
Subject(s) - margin (machine learning) , economics , elasticity (physics) , fixed cost , variable cost , international economics , variable (mathematics) , product (mathematics) , international trade , microeconomics , mathematics , mathematical analysis , materials science , geometry , machine learning , computer science , composite material
Abstract We estimate the elasticity of extra EU French firm‐level exports with respect to applied tariffs – a variable trade cost. We implement a method controlling for unobserved firm characteristics driving selection in exports market, and controlling for the multilateral 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.