Barrier or opportunity? How trade regulations shape Colombian firms' export strategies

Abstract

Firms increasingly have to contend with trade regulations to access foreign markets. We quantify their relative importance and the heterogeneous effects for Colombians firms exporting to Latin America between 2007 and 2017, focusing on specific types and channels. Using panel evidence from a firm‐level gravity model with a difference‐in‐differences identification strategy, technical barriers to trade (TBTs) and quantity control measures both decrease trade on average. Other non‐tariff measures and tariffs play a minor role. At its core, TBT and quantity measures reallocate trade from small to big firms. The same mechanism benefits firms participating in global value chains. However, quantity controls make it more likely that big firm will leave export markets to the benefit of smaller ones. Our results control for the endogeneity of trade regulations and are robust to the use of different samples and measures of firm size.