Making (Small) Firms Happy. The Heterogeneous Effect of Trade Facilitation Measures

The Institute of Economics will hold the next meeting of its Seminar Series on Tuesday, January 12, 2016: Lionel Fontagné, from University Paris 1 Panthéon-Sorbonne and Paris School of Economics, will present the paper "Making (Small) Firms Happy. The Heterogeneous Effect of Trade Facilitation Measures"

Abstract: This paper considers the asymmetric effect of Trade Facilitation Agreement (TFA) policies on heterogeneous exporters. We do so by matching a detailed panel of French firm exports to a new database of Trade Fa- cilitation Indexes (TFIs) recently released by the OECD. We focus only on thos

e TFIs that correspond to the main policy areas negotiated at the WTO. We analyze the effect of these TFIs on three trade-related outcomes: (i) exported value (firm intensive margin), (ii) number of products exported (product extensive margin) and (iii) the average export value per product exported (product intensive margin). We also test whether TFIs affect the product diversification of French firms. Our main finding is that TFA provisions affect small and large firms differently. While improved TF in terms of information availability, advance ruling and appeal procedures mainly benefit small firms, simplification of documents and automation tend to favor trade of large firms. We find a negative effect of simplification and automation of formalities at the border on the intensive margin for small firms. We show that this result may be due to the pos- itive indirect effect of TFA reforms on corruption and the consequent increased competition from large firms.