Do Tariffs Matter for the Extensive Margin of International Trade? An Empirical Analysis

Peter Debaere and Shalah Mostashari

No 5260, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Explaining the strong growth of world trade with the relatively moderate tariff reductions since WW II is a quantitative challenge. The trade of new goods resulting from tariff reductions, it has been conjectured, might be the missing link. We investigate this hypothesis with very disaggregate trade and tariff data for US bilateral imports between 1989 and 2000. A probit analysis shows that changing tariffs and tariff preferences influence the extensive margin of countries' exports to the US in a statistically significant way. Tariff reductions give way to new goods' being traded, and tariff preferences reduce the extensive margin of trade for the excluded party. However, while we do find evidence of both trade creation and diversion on the extensive margin, our estimates show that country and industry specific factors are far more important than tariffs in explaining why countries start trading new goods and stop trading others.

Keywords: International; trade (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2005-09
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (15)

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