Does home (output) import tariff reduction increase home exports?: Evidence from Korean manufacturing plant–product data
摘要
This study explores “home” tariff driven exporting behavior using rich Korean plant–product data. By tracing home output and input tariffs and partner country’s tariffs against exporting goods, we find a decline in home output tariffs leads to an increase in new product entries to export market for home small-sized plants, particularly when these plants have a low markup. Also, a decrease in home input tariffs significantly increases home incumbent small exporters’ real export growth, with a particularly pronounced effect on those with lower markups. We find tariff reduction against Korean exporters leads to an increase in export growth for high markup Korean incumbent plants. Specifically, this study unveils a new mechanism of intermittent exporters doing ‘escape competition’ toward foreign markets but testing the water, that small domestic plants faced with heightened competition driven by an output tariff cut, seek opportunities to sell their products in export markets. Lastly, we confirm markup changes driven by output and input tariffs that previous works detected.