Effects of Lowering Tariffs on Extensive and Intensive Margins in Latin America, 1990-2015

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Dec 2019
To study how trade liberalization has impacted Latin Americas extensive and intensive margins between 1990 and 2015, we estimated the random growth first-difference model proposed by Baier, Bersgtrand, and Feng (2014), replacing their economic integration agreement dummy with a tariff-change variable. We found that in the short run (over five years), lowering bilateral country tariffs increases the value of trade and the intensive margin, but not the extensive margin. For the long-term analysis (over 25 years), we estimated an extended version of Debaere and Mostasharis (2010) methodology, finding that the range of products that Latin American countries exported increased only 4.61% due to tariff reductions between 19902015.