The Impact of FTA on Extensive and Intensive Margins: The Case of Japan-Mexico FTA

27 Pages Posted: 22 Feb 2016

See all articles by Arata Kuno

Arata Kuno

Asia University - Faculty of International Relations

Shujiro Urata

Waseda University-Graduate School of Asia-Pacific Studies

Kazuhiko Yokota

Waseda University - Graduate School of Commerce

Date Written: February 20, 2016

Abstract

This study examines the impacts of Japan-Mexico FTA (JMXFTA) on Japanese exports to Mexico. The authors construct a theoretical trade model of heterogeneous firms based on the Melitz-Chaney model, and derive the theoretical relationship of the impacts of tariff changes on extensive and intensive trade margins. Applying this model, the authors estimate the impacts of JMXFTA on product-level extensive and intensive margins of Japan’s exports to Mexico by using the most detailed commodity trade data. The results show that the tariff reduction due to JMXFTA increases the intensive margin while no clear evidence is found regarding the effect on extensive margin. This indicates that in the short-run, the JMXFTA exerted more favorable effect on the existing exporters than on new export market entrants.

Keywords: Free trade agreements, Extensive and intensive trade margins, Tariffs

JEL Classification: F14, F15

Suggested Citation

Kuno, Arata and Urata, Shujiro and Yokota, Kazuhiko, The Impact of FTA on Extensive and Intensive Margins: The Case of Japan-Mexico FTA (February 20, 2016). Available at SSRN: https://ssrn.com/abstract=2735572 or http://dx.doi.org/10.2139/ssrn.2735572

Arata Kuno (Contact Author)

Asia University - Faculty of International Relations ( email )

Tokyo 180-8629
Japan

Shujiro Urata

Waseda University-Graduate School of Asia-Pacific Studies ( email )

1-21-1 Nishiwaseda
Shinjuku-ku, Tokyo 169-8050
Japan

Kazuhiko Yokota

Waseda University - Graduate School of Commerce

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan

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