KI EL W ORKING P APER - Trade Liberalization along the Firm Size

We interact these size bins with the dummy Idt, taking the category of the smallest exporters as the base category.22 The associated series of coefficients βk captures ηfpdζfpd for the k-th size category relative to the base category. [...] The estimates of β coefficients show that the increase in exports due to the FTA is greatest for exporters in the top quartile (Q4) of the size distribution. [...] For exporters belonging to the top size category, the absolute value of the tariff elasticity is by the amount 1.13 larger than for exporters in the bottom size bin. [...] Only the largest firms appear to exhibit stronger behavioral responses to trade cost changes, so that, relative to the smallest exporters, the stronger responses of exporters in the second and third quartiles of the size distribution must be entirely due to larger effective reductions in the cost of NTBs. [...] Such a structure could generate firm entry from the middle of the size distribution, and, at the same time, higher growth rates by the largest firms.31 Such assumptions may be rationalized by the fact that larger firms have the capacity to plan and invest towards better leveraging of the benefits of the agreement eg.