Variable Trade Costs, Composition Effects, and the Intensive Margin of Trade

We estimate the elasticity of extra EU French firm-level exports with respect to applied tariffs - a variable trade cost. We implement a method controlling for unobserved firm characteristics driving selection in exports market, and controlling for the multilateral resistance terms. Results confirm a significant negative impact of tariffs on firm-level exports, with one fifth of this impact falling on the induced adjustment in the exporters' product mix. When controlling for this adjustment and focusing on the core exported products, the elasticity of the product-destination firm-level exports with respect to applied tariffs is estimated at about -2.5.