Trade Liberalization and the Extensive Margin of Differentiated Goods: Evidence from China

Johannes Van Biesebroeck, Yingting Yi and Elena Zaurino

No 15906, CEPR Discussion Papers from Centre for Economic Policy Research

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 (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-int and nep-sea
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Journal Article: Trade liberalisation and the extensive margin of differentiated goods: Evidence from China (2022)
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