to correct market imperfections, including alleviating information asymmetry and mitigating risks associated with consuming certain goods.

Table 3: The effect of non-tariff measures on firm-level intensive margin of trade: Heterogeneity by Class of NTM, Product Position along the Value Chain and Firm size .

|Outcome:|Export V|alue (logs)||||||||
|---|---|---|---|---|---|---|---|---|---|
|_Heterogeneity:_|Class of|NTM||Product’s|position al|ong VC|Firm Size|||
||All|Agric.|Manuf.|All|Agric.|Manuf.|All|Agric.|Manuf.|
||(1)|(2)|(3)|(4)|(5)|(6)|(7)|(8)|(9)|
|log _NTMpcdt_||||_−_0.179<sup>_∗∗∗_</sup>|_−_0.268<sup>_∗∗∗_</sup>|_−_0.254<sup>_∗∗∗_</sup>|_−_0.186<sup>_∗∗∗_</sup>|_−_0.222<sup>_∗∗_</sup>|_−_0.369<sup>_∗∗∗_</sup>|
|||||(0.056)|(0.093)|(0.095)|(0.065)|(0.113)|(0.096)|
|log _SPSpcdt_|_−_0.090<sup>_∗_</sup><br>(0.048)|_−_0.244<sup>_∗∗_</sup><br>(0.100)|_−_0.042<br>(0.132)|||||||
|log _TBTpcdt_|_−_0.031<br>(0.062)|0.013<br>(0.146)|_−_0.155<sup>_∗∗_</sup><br>(0.066)|||||||
|log _NTMpcdt × NCp_||||0.224<sup>_∗∗∗_</sup><br>(0.062)|0.268<sup>_∗∗∗_</sup><br>(0.072)|0.155<sup>_∗_</sup><br>(0.088)||||
|log _NTMpcdt × LFi_|||||||0.135<sup>_∗∗_</sup>|0.054|0.312<sup>_∗∗∗_</sup>|
||||||||(0.069)|(0.092)|(0.100)|
|log _NTMpcdt × MFi_|||||||0.109<sup>_∗_</sup><br>(0.060)|0.061<br>(0.083)|0.202<sup>_∗∗_</sup><br>(0.086)|
|log _Tari f fpcdt_|0.012|0.037|_−_0.019|0.010|0.028|_−_0.019|0.012|0.035|_−_0.019|
||(0.016)|(0.033)|(0.015)|(0.016)|(0.033)|(0.015)|(0.016)|(0.033)|(0.015)|
|Observations|101,379|39,502|61,265|101,379|39,502|61,265|101,379|39,502|61,265|
|Adjusted _R_<sup>2</sup>|0.632|0.542|0.646|0.631|0.542|0.646|0.632|0.542|0.646|

Notes: “All” denotes all sectors, “Agric.” denotes the agriculture and food sectors, while “Manuf.” indicates the manufacturing sector. _NCp_ is equal to one if the product is an intermediate one, and zero otherwise. _LFi_ and _MFi_ are dummy variables indicating whether a firm is large ( _LFi_ ) or medium ( _MFi_ ) respectively. Robust standard errors clustered at the origin-destinationproduct level are in parentheses. ***, ** and * denote significance at 1%, 5%, and 10%. All models include controls for firmorigin-product, firm-product-year and destination-year fixed effects, which are excluded from the table for brevity.

# **5.2.3 Firm Size**

We now examine whether the trade effect of NTMs varies with firm size. Given both internal (e.g., scale, productivity, experience, technology) and external (e.g., border and behind-theborder measures) barriers to international trade, there are likely to be scale effects. In a Melitz (2003)-style framework with heterogeneous firms and fixed market-entry costs, the effect of trade policies on export performance is decreasing in firm-level productivity, which in many cases is positively associated with firm size. If increases in trade costs raise the productivity threshold required for trading, then in a standard heterogeneous firm model of trade with constant elasticity of substitution (CES) preferences (Melitz, 2003; Chaney, 2008), a large number of, mostly small, firms will stop trading. Even if we allow for firm-specific entry costs, Arkolakis (2010) predicts that when trade costs increase, trade shares are reallocated away from small firms because sales’ elasticity for variable trade costs is decreasing in firm size. The resulting tougher competitive environment in the domestic market reinforces the link between productivity and size. This will imply a heterogeneous effect on the intensive margin of individual exporters if we assume that large firms are better at bearing the costs or face lower elasticity of substitution (Spearot, 2013). Hence, we expect the trade costs induced by country-specific variation in NTMs to be more pronounced for smaller firms. However, because larger exporting firms are likely to sell to multiple destinations, at the same time they are also likely to be exposed to more risk from country-varying NTMs.

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