vary across countries, the use of a balanced panel imposes implicit restrictions. Luckily, the novel estimator developed by Guimaraes and Portugal (2010) is able to estimate highdimensional fixed effects in an iterative procedure on an unbalanced panel.

One might also worry about the linearity of the estimating equations. However, the nature of our application is to only look at very local changes. The level of exports and the extent of export market participation is mostly captured by the rich set of double interaction dummies. In particular, the specification includes a country-product interaction dummy that fixes the average export performance. We then only estimate how this average performance is influenced at the margin by small changes in market access. Hence, the linearization that Santos Silva and Tenreyro (2006) concern themselves with is of a secondary importance here. Similarly, the use of a non-linear model for export market participation, e.g. a logit or probit model, is of lesser value here. The change in market access will only influence the probability of participation marginally and the included fixed effects will make sure the predicted probabilities are bounded away from zero and one.

# **5. Data**

## **5.1 Sources**

We perform the analysis on a detailed dataset that combines trade data with information on market access for imports into the European Union and the United States of around 5,000 products under various preferential schemes.

The trade data consists of bilateral import and export transaction values taken from BACI which is the World trade database developed by the CEPII at a 6-digit level of product disaggregation, classified according to the Harmonized System (HS) 1992 nomenclature, for more than 200 countries from 1995 to 2016.<sup>17</sup> An advantage of using BACI rather than the underlying information from UN Comtrade is that the same trade flow, which can be reported differently by the exporter and importer, has been reconciled in order to have a single statistic on each directional bilateral relationship. BACI only reports positive trade flows and we balance the dataset along three dimensions (exporter, product, and time) by including zerovalued trade flows.

We measure changes in market access in two ways: whether the exporter-product pair is under a preferential trade agreement (discrete measure) and the magnitude of the preferences granted (continuous measure). To construct the latter, we use information on ad-valorem tariff rates applicable under each preferential scheme—GSP, EBA and GSP+ for imports into the EU and AGOA for imports into the United States—for all beneficiary countries. These data are obtained from WITS, a database maintained by the World Bank which provides access to several international measures. The original source of tariffs rates in WITS is UNCTAD TRAINS. In order to calculate the preferential tariff margin, defined as the difference between preferential and non-preferential rates, we also include the MFN tariff rate for all products. The WITS database contains an identifier for groups of countries to which a particular tariff

> 17 Original data are provided by the United Nations Statistical Division (COMTRADE database). BACI is constructed using a procedure which reconciles the declaration of importers and exporters as explained in Gaulier and Zignago (2010).

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