A Microeconomic Look at the Impact of Tariffs on Latin American Exports

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Dec 2019
The impact of tariff changes on aggregate bilateral trade flows operates through both the intensive and extensive margins of trade. However, there is a difference in the timing of this impact. After a tariff fall, the immediate adjustment in export flows comes about via the intensive margin. The reaction from the extensive margin seems to happen one year later. We thus focus on the intensive margin and find that the impact on it is heterogenous. Higher tariffs are more detrimental to larger firms than to their smaller counterparts.