EMNES Working Paper 014
The paper examines the impact of Technical Barriers to Trade (TBTs) on firm exports in Egypt, over the period (2005-2011). It uses firm-level data for Egypt and combines it with the TBT specific trade concerns database of the WTO. Employing a variant of a gravity model with high-dimensional fixed effects, it estimates the impact of TBTs on firm intensive and extensive margins, exit and entry probabilities, as well as on product and market diversification. Regressions examine the heterogeneous effect of TBTs by firm size. Results indicate an insignificant effect of TBTs on firm intensive margin. On the other hand, the extensive margin and entry probability are negatively affected by TBTs, while exit probability is positively affected. Accordingly, TBTs mainly represent an increase in fixed costs of exporting. Importantly, smaller firms are more adversely affected by TBTs in their export participation and entry and exit decisions. The effect of TBTs on firm product diversification is found to be sector-dependent; positive for agricultural sectors and mixed for non-agricultural ones. Finally, firms generally tend to increase their market diversification in response to TBTs. This is especially true for large firms within their set of African and Asian destination markets. By contrast, there are less prospects of firm diversification into less stringent destinations within the European region.