Sonali Chowdhry (ifo Institute/ ifo Center for International Economics)
This paper examines multiple margins of firm-level adjustment following the entry into force of the deep and comprehensive EU-Korea FTA in 2011. Using French customs data spanning 2000-2016, the paper exploits variation in tariffs and tariff reductions across products under the FTA, assuming them to be exogenous from an individual firm's perspective. It then employs difference in differences to identify the impact of the FTA on firms' exporting activity. On the extensive margin, the FTA led to an increase in the probability of exporting to Korea and an increase in the product scope of firms. On the intensive margin, firms responded to the tariff reduction by primarily lowering unit values. The impact of the FTA is also found to be heterogeneous along the firm size distribution.