Does input trade liberalization boost downstream firms exports?
Résumé
We analyze the impact of input tariffs on export status and export performances of processing firms. From a theoretical model with heterogenous downstream firms, we show that falling input tariffs induces a reallocation of exports market shares from low productivity firms to high productivity firms. In addition, when export fixed costs are high enough, a fall in input tariffs raises the probability of exporting and the most productive firms gain more than the less productive firms. In contrast, when export fixed costs are low enough, a fall in input tariffs decreases the probability of entering the foreign markets. Under this configuration, the exports of the high productivity firms rise at the expense of the low productivity firms. We then confront the predictions of the theoretical model to firm-level data on French agrifood sector by developping a two-stage estimation procedure that uses an equation for selection into export markets in the first stage and exports equation in the second stage. It appears that agricultural trade liberalization favors the exit of French firms to foreign markets. In addition, the more productive exporting firms (less than 20 percent of exporting firms) gain from falling input tariffs while the less productive firms lose.
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