Table 8: Import share, trade policy and pricing-to-market: IV regressions

||(1)|(2)|(3)|(4)|(5)|(6)|
|---|---|---|---|---|---|---|
|Dep. var: ln unit value|||||||
|ln RER|0.009|-0.218<sup>_b_</sup>|-0.337<sup>_b_</sup>|0.056<sup>_b_</sup>|-0.211|-0.233|
||(0.022)|(0.107)|(0.169)|(0.023)|(0.178)|(0.156)|
|_×_ import share_fdp_|0.431<sup>_a_</sup>|10.623<sup>_a_</sup>||-0.194<sup>_b_</sup>|9.455<sup>_b_</sup>||
||(0.088)|(3.417)||(0.081)|(4.366)||
|_×_ import share_odp_|||1.568<sup>_a_</sup>|||1.087<sup>_b_</sup>|
||||(0.461)|||(0.454)|
|**First stage** (dep. var.: ln RER _×_ import share)|||||||
|ln RER||0.030<sup>_a_</sup>|0.266<sup>_a_</sup>||0.030<sup>_a_</sup>|0.285<sup>_a_</sup>|
|||(0.007)|(0.042)||(0.009)|(0.052)|
|_×_ ln(tarif +1)||-0.086<sup>_a_</sup>|-0.558<sup>_a_</sup>||-0.065<sup>_a_</sup>|-0.515<sup>_a_</sup>|
|||(0.025)|(0.155)||(0.024)|(0.183)|
|_×_ NTM AVE||0.006|0.134||0.002|0.124|
|||(0.006)|(0.095)||(0.007)|(0.111)|
|Observations|454150|92048|91040|270068|55046|54747|
|Hansen overid p-value|-|0.07|0.62|-|0.08|0.89|
|F-stat excl. instruments|-|6.5|7.9|-|3.7|6.1|
|Firm_×_product_×_dest. FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Origin_×_year FE|Yes|Yes|Yes|No|No|No|
|Firm_×_product_×_year FE|No|No|No|Yes|Yes|Yes|

> _c_ significant at 10 percent; _b_ significant at 5 percent; _a_ significant at 1 percent. Robust standard errors clustered by product-origin-destinationyear are in parentheses. The Stock and Yogo critical value for weak instrument test based on a 20 percent (resp. 10 percent) 2SLS bias at the 5 percent level of significance is 8.75 (resp. 19.9) in all estimations. Estimations also lrer _×_ ln(# product _t_ 0) and ln(dest. GDP/cap).

exchange-rate shocks. This is what we find.<sup>34</sup> In column (2) we find a positive and significant effect of market share on firm-market specific degree of PTM, when instrumented by trade policy. This effect survives when controlling for firm-product-year fixed effects in column (5). Columns (3) and (6) use product-destination rather than firm-product-destination specific market shares. The coefficients are more precisely estimated in this case, which is to be expected as trade-policy instruments affect all exporters from a given origin country in a symmetric way. Note that in the first stage, only the interaction with tariffs is statistically significant. This might be due to the fact that tariffs vary more, as they are _de facto_ bilateral, contrary to NTMs. In general, our instruments are not very strong because of the insignificance of the NTM interaction in the first stage; as it turns out, the values of the F-stat of the first stage increase to 10-18 (and the second stage results are qualitatively similar) when only tariffs are considered as instruments.

# **7 Trade policy and aggregate pass-through**

Up to now our analysis was exclusively performed at the firm-level. Whether the significant firm-level impact of trade policy on pricing-to-market and market power translates into an aggre-

> 34Trade policy variables also have a direct impact on unit values, but this effect is captured by the firm-productdestination fixed effects, given that we use time-invariant policy measures.

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