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The DR-CAFTA and the extensive margin : a firm-level analysis
 
Author:Molina, Ana Cristina; Bussolo, Maurizio; Iacovone, Leonardo; Collection Title:Policy Research working paper ; no. WPS 5340
Country:Dominican Republic; Central America; Date Stored:2010/08/27
Document Date:2010/06/01Document Type:Policy Research Working Paper
Language:EnglishRegion:Latin America & Caribbean
Report Number:WPS5340SubTopics:Markets and Market Access; Export Competitiveness; Free Trade; Debt Markets; Trade Policy
Volume No:1 of 1  

Summary: This paper examines the export behavior of Dominican Republic exporters following the implementation of the Dominican Republic-Central America Free Trade Agreement in 2007. Using a firm-level dataset for 2002-2009, the authors investigate the effects of a tariff reduction on the extensive margin. The analysis distinguishes the impact on the entry of new firms, exports of new products, and entry into the Agreementメs markets. The paper analyzes whether the agreement prevents incumbent exporters from exiting the market. The results suggest that tariff cuts had a positive although very small effect on the extensive margin. A decline in tariffs also seems to reduce the probability of exit, but the effect is also small. The evidence calls for complementary policies aiming at helping exporters maximize the benefits of the agreement.

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