Working Paper: CEPR ID: DP15906
Authors: Johannes Van Biesebroeck; Yingting Yi; Elena Zaurino
Abstract: We exploit tariff reductions associated with China’s entry into the WTO to evaluate whether the response of trade flows at the extensive margin depends on the degree of product differentiation. We adopt a 4-way difference-in-differences approach to identify the effects as cleanly as possible by comparing market entry of products from each WTO member into China with entry into India and Indonesia. The absolute tariff elasticities are estimated to be relatively large, compared to existing estimates. This is especially true for differentiated goods, for goods with low Chinese demand elasticity, and for exports from OECD countries. We provide both new evidence and a theoretical justification for the heterogeneity of these effects across products and countries.
Keywords: WTO; Import Tariff; Trade Policy; Exports
JEL Codes: F10; F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tariff reductions (F13) | Probability of export market entry (F10) |
| Differentiated goods (L15) | Probability of export market entry (F10) |
| Lower demand elasticities (D12) | Probability of export market entry (F10) |
| Tariff reductions (F13) | Export market entry for goods with lower demand elasticities (F14) |
| OECD countries (O57) | Response to tariff reductions (F69) |
| Non-OECD countries (O10) | Response to tariff reductions (F69) |