What gains and distributional implications result from trade liberalization?

Maria Bas () and Caroline Paunov
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Maria Bas: University of Paris 1, Centre d'Economie de la Sorbonne (CES)

No 2019-003, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: This paper investigates the distributional impacts of trade liberalization across firms, consumers and workers. Using firm-product-level census data for Ecuador, we exploit exogenous tariff changes at entry to the World Trade Organization. We show that with input tariff cuts firms access higher quality and new input varieties. Consequently, firms increase their product scope and quality, while their production’s skill-intensity increases and costs decrease. “Real” productivity (TFPQ) increases only in the medium run, following adjustments to produce more and higher quality products. Positive immediate revenue productivity (TFPR) gains result because firms’ markups increase. Consumers still gain as quality-adjusted prices decrease and varieties increase. Workers benefit differentially: skilled workers’ wages rise compared to less skilled workers’ wages. Input-tariff liberalization also has distributional impacts across firms. Only more productive firms with high markups increase product scope and quality and gain market shares. With output-trade liberalization the least productive firms decrease their product scope.

Keywords: gains from trade; input and output tariff reductions; product scope; product quality; market share; quantity and revenue total factor productivity; TFPQ; TFPR; skills premium; Ecuador (search for similar items in EconPapers)
JEL-codes: D22 F16 L60 O12 O30 O54 (search for similar items in EconPapers)
Date: 2019-02-13
New Economics Papers: this item is included in nep-bec and nep-int
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: What gains and distributional implications result from trade liberalization? (2019)
Working Paper: What gains and distributional implications result from trade liberalization? (2019)
Working Paper: What gains and distributional implications result from trade liberalization (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2019003

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