Working Paper: NBER ID: w16641
Authors: Costas Arkolakis; Sharat Ganapati; Marc-Andreas Muendler
Abstract: To quantify trade frictions, we examine multi-product exporters. We build a flexible general equilibrium model and estimate market entry costs using Brazilian firm-product-destination data under rich demand and market-access cost shocks. Our estimates show that additional products farther from a firm’s core competency come at higher production costs, but there are substantive economies of scope in market-access costs. Market-access costs differ across destinations, falling more rapidly in scope at nearby regions and at destinations with fewer non-tariff barriers. We evaluate a counterfactual scenario that harmonizes market-access costs across destinations and find global welfare gains similar to eliminating all current tariffs.
Keywords: trade frictions; market access costs; multiproduct exporters; non-tariff measures
JEL Codes: F12; F14; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market access costs (L11) | firm export behavior (D22) |
| non-tariff measures (NTMs) (F13) | market access costs (L11) |
| market access costs (L11) | extensive margin of exporting (F10) |
| product distance from core competency (L15) | production costs (D24) |
| expanding product offerings (D49) | marginal market access cost decreases (D40) |
| harmonizing market access costs (D49) | global welfare gains (D69) |
| non-tariff measures (NTMs) (F13) | product sales (L81) |
| non-tariff measures (NTMs) (F13) | exporter scope (F10) |