Table 7: NTMs, tariffs and exports: Firm-product-destination level

||(1)|(2)|(3)|(4)|(5)|(6)|(7)|(8)|
|---|---|---|---|---|---|---|---|---|
|Dep. var.|ln v|alues|ln vol|umes|ln unit|values|Import|shares|
|NTM AVE|-0.030|0.019|-0.106<sup>_a_</sup>|-0.018|0.075<sup>_a_</sup>|0.040<sup>_a_</sup>|0.002|0.008<sup>_a_</sup>|
||(0.035)|(0.036)|(0.040)|(0.038)|(0.022)|(0.013)|(0.002)|(0.002)|
|ln(tarif +1)|-0.476<sup>_a_</sup>|-0.483<sup>_a_</sup>|-0.398<sup>_c_</sup>|-0.439<sup>_a_</sup>|-0.089|-0.051|-0.014<sup>_b_</sup>|-0.013<sup>_b_</sup>|
||(0.176)|(0.145)|(0.216)|(0.148)|(0.116)|(0.041)|(0.007)|(0.005)|
|Observations|51055|41477|51055|41477|51055|41477|48972|39465|
|Adj. R<sup>2</sup>|0.571|0.612|0.722|0.781|0.832|0.938|0.507|0.370|
|Firm_×_dest. FE|Yes|No|Yes|No|Yes|No|Yes|No|
|Product FE|Yes|No|Yes|No|Yes|No|Yes|No|
|Firm_×_product FE|No|Yes|No|Yes|No|Yes|No|Yes|
|Destination FE|No|Yes|No|Yes|No|Yes|No|Yes|

> _c_ significant at 10 percent; _b_ significant at 5 percent; _a_ significant at 1 percent. Robust standard errors. Values, volumes and unit values are averages over the period of the corresponding firm-destination-product triad and are taken in log. A product is defined at the 6 digit level. Import shares are computed as the share of firm _f_ in destination’s _d_ total import of a 4-digit level sector, and are averaged over the period of the corresponding firm-destination-product triad. Observations perfectly predicted by the fixed effects are dropped.

concentration tend to be higher in destination-products faced with stronger NTMs (Table A.35). This again accords well with our interpretation that rather than displacing foreign firms in favor of domestic ones like tariffs, NTMs displace small firms in favor of larger ones, including both domestic firms and foreign exporters. This increases the market power of non-exiters. Our finding that NTMs are mostly associated with changes at the extensive margin of trade is also consistent with our working assumption that they mostly increase fixed rather than variable costs.<sup>32</sup> Our results in Table 7 and Table A.35 are consistent with those in Fernandes et al. (2015) and Fontagn ́e et al. (2015). Fontagn ́e et al. (2015) use French firm-level data to show that SPS concerns raised at the WTO entail compliance costs, raising unit values and inhibiting entry. In Fernandes et al. (2015) the focus is on the impact of a specific type of NTMs, namely pesticide standards, on firm exports of agricultural products. Still, the authors show that more restrictive standards in the importing country relative to the exporting country, lower firms’ probability to export as well as their export values and quantities. While these results help understand the mechanisms through which NTMs affect trade, they, however, do not speak directly about their impact on market power, which cannot be directly measured in the absence of information on the entire set of firms, both foreign and domestic. This makes apparent how complementary our approach is to these papers, as it allows us to circumvent this problem and uncover that NTMs have unambiguous and opposite effects to that of tariffs when it comes to market power.

Our interpretation of the effect of NTMs is in terms of compliance costs. An alternative, and empirically undistinguishable interpretation is that higher NTMs, by increasing the quality requirements for products or reducing information frictions, may increase the demand for high quality goods. Therefore, high quality firms raise their market shares and hence their market power in those destinations, while low quality firms disappear. Both interpretations are consistent with our main finding that NTMs raise market power at the firm-level. The fact that unit values are positively correlated with NTMs in Table 7 fall in line with the quality-based story.

> 32See also additional results in Table A.36 in Section C.18 of the online appendix.

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