Midwest Social Sciences Journal


I analyze the firm-level effects on Colombia entering into Preferential Trade Agreements (PTAs) between 2007 and 2013. The combination of detailed firm-level data and PTAs make this article unique. In particular, I look at two separate potential trade-promotion effects of the agreements. The first result deals with how exporting firms in Colombia respond to the tariff cuts in the agreements. The tariff cuts from the agreements increase the size of exports by Colombian firms (the intensive margin); however, tariff cuts do not increase the number of exporting Colombian firms (the extensive margin). The second result deals with how the signed PTAs affect how Colombia sets tariffs on the set of the world. I find that the agreements do not affect Colombia’s other tariffs, a result that further complicates the open question of whether trade agreements lead to lower overall tariffs (building-block effect) or higher overall tariffs (stumblingblock effect).