Al a ez, Robe ; And easen, Eugenia
A icle
Explo ing he e ec s o FTAs on Chilean expo s:
He e ogeneous esponses and inancial cons ain s
Es udios de Economía
P o ided in Coope a ion wi h:
Depa men o Economics, Uni e si y o Chile
Sugges ed Ci a ion: Al a ez, Robe ; And easen, Eugenia (2024) : Explo ing he e ec s o FTAs on
Chilean expo s: He e ogeneous esponses and inancial cons ain s, Es udios de Economía, ISSN
0718-5286, Uni e sidad de Chile, Depa amen o de Economía, San iago de Chile, Vol. 51, Iss. 2, pp.
299-324
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Es udios de Economía, Vol.51 - Nº 2, Diciemb e 2024. Págs 299-324
Explo ing he E ec s o FTAs on Chilean Expo s: He e ogeneous
esponses and Financial Cons ain s*
Explo ando los E ec os de loa ALCs en las Expo aciones Chilenas:
Respues as He e ogéneas y Res icciones Financie as
ROBERTO ALVAREZ**
EUGENIA ANDREASEN***
Abs ac
In his pape , we examine he in luence o F ee T ade Ag eemen s (FTAs) on
Chilean expo s du ing he pas hi y yea s. O e he las h ee decades, Chile
has en e ed in o 31 FTAs wi h 65 coun ies, encompassing nea ly 90% o glob-
al GDP. Despi e his, he e’s a no able absence o empi ical e idence ega ding
he ex en and na u e o he impac o hese ag eemen s on expo olumes and
p oduc di e si ica ion. Wi h a ich da ase encompassing bila e al ade lows
a he p oduc -le el and key inancial indica o s, we employ a di e ence-in-di -
e ences app oach o p o ide obus e idence o he posi i e impac o hese
FTAs on expo le els and he a ie y o p oduc s expo ed. Ou analysis also
e eals a ia ions in hese e ec s based on he indus ies’ ini ial expo sha e
and ading pa ne s’ income le els. Fu he mo e, we in es iga e how FTAs in-
e ac ed wi h he inancial de elopmen and capi al con ol policies o ading
pa ne s, demons a ing hei ole in mi iga ing inancial cons ain s on ade.
Key wo ds: In e na ional ade, F ee ade a angemen s, He e ogeneous e -
ec s, inancial ic ions.
JEL Classi ica ion: F1, F13, F14, F63
*
**
***
We hank C is ian Flo es and Na alia Ga ido o excellen esea ch assis ance, and
Sebas ian Cla o and a endan s o he Con e ence 50 yea s o Es udios de Economía.
Eugenia And easen wishes o hank he ANID, FONDECYT REGULAR # 1200101,
o i s inancial suppo .
Depa men o Economics, Uni e si y o Chile. Diagonal Pa aguay 257, San iago,
Chile. Email: obal [email p o ec ed]
Depa men o Economics, Uni e si y o Chile. Diagonal Pa aguay 257, San iago,
Chile. Email: [email p o ec ed].
Recei ed: Augus , 2023 Accep ed: Augus , 2024
300 Es udios de Economía, Vol.51 - Nº 2
Resumen
En es e abajo se examina la in luencia de los Acue dos de Lib e Come cio
(ALCs) en las expo aciones chilenas du an e los úl imos ein a años. A lo
la go de las úl imas es décadas, Chile ha susc i o 31 ALC con 65 países, que
ep esen an ce ca del 90% del PIB mundial. A pesa de es o, exis e poca e i-
dencia empí ica espec o al alcance y na u aleza del impac o de es os acue -
dos en olúmenes expo ados y di e si icación de las expo aciones. Usando
una base de da os de lujos bila e ales de come cio a ni el de p oduc o com-
plemen ada con in o mación de a iables cla es de desa ollo inancie o, se
emplea un análisis de di e encias en di e encias pa a p opo ciona e idencia
obus a del impac o posi i o de es os ALCs en los ni eles de expo ación y el
núme o de p oduc os expo ados. Nues o análisis e ela di e encias en es os
e ec os dependiendo de la impo ancia inicial del sec o y de los ni eles de
ing eso del socio come cial. Además, se in es iga el e ec o in e ac i o de ALCs
con desa ollo inancie o y con oles de capi ales en el socio come cial, mos-
ando que los acue dos son ú iles pa a mi iga el impac o de las es icciones
inancie as en el come cio in e nacional.
Palab as cla e: Come cio in e nacional, acue dos de lib e come cio, e ec os
he e ogéneos, icciones inancie as
Clasi icación JEL: F1, F13, F14, F63
1. INTRODUCTION
Chile, as an ea ly adop e o p og essi e economic e o ms in La in Ame i-
ca, has been a pionee in pu suing F ee T ade Ag eemen s (FTAs) as a s a egic
ade policy. Since he es o a ion o democ acy in 1990, successi e demo-
c a ic go e nmen s ha e pu sued his s a egy wi h he p ima y objec i e o
expanding access o o eign ma ke s and bols e ing expo di e si ica ion. This
app oach builds upon Chile’s ea lie expe imen wi h unila e al ade libe al-
iza ion in he 1970s and 1980s, ende ing Chile an in e es ing se ing o s udy-
ing he e ec s o selec i e ade policies. While some s udies ha e explo ed
he e ec s o ce ain ag eemen s, a comp ehensi e e alua ion o hei o e all
impac is s ill missing.
The exis ing li e a u e has iden i ied la ge and posi i e e ec s o FTAs on
in e na ional ade (Rose, 2004; Baie and Be gs and, 2007, 2009; Eiche and
Henn, 2011). This is in con as o unila e al ade libe aliza ion, whe e he in-
c ease in expo s may no be as p onounced, excep o po en ial second- ound
o indi ec e ec s o a i educ ions on inpu s (Eiche and Henn, 2011). Ad-
301
Explo ing he E ec s o FTAs on Chilean... / Robe o Al a ez, Eugenia And easen
di ionally, he li e a u e has ound ha he magni ude o he inc ease in expo s
igge ed by FTAs depends on a ious ac o s, such as he p ice elas ici y o
expo demand and he p esence o ixed cos s in expo ing. Baie e al. (2019)
show e idence o he e ogeneous e ec s o he FTAs depending on dis ance,
ex-an e ade ic ions and he abili y o in luence he ading pa ne s’ e ms
o ade.
Fo he case o Chile, se e al pape s ha e s udied speci ic FTAs, inding
o e all posi i e e ec s in e ms o olume o expo s bu wi h he e ogenous
indings wi h ega ds o p oduc di e en ia ion (Chumace o e al., 2004; Jean e
al., 2014a; Malho a and S oyano , 2008; Wehne , 2011). Howe e , a comp e-
hensi e e alua ion cap u ing he he e ogeneous impac s o hese ag eemen s is
s ill missing. In ligh o he a ied and some imes con adic o y indings in he
li e a u e, his pape aims o p o ide a comp ehensi e e alua ion o he e ec s
o FTAs on Chilean expo s and p oduc di e en ia ion, examining no only
he o e all e ec s bu also he subs an ial he e ogenei y wi hin.
Ou cen al in es iga ion ocuses on whe he FTAs ha e indeed led o a sig-
ni ican inc ease in he alue o Chilean expo s and a b oade ange o expo -
ed p oduc s. Fu he mo e, we aim o unco e which indus ies ha e bene i ed
he mos om hese ag eemen s and whe he he e ec s o FTAs a e mode a ed
o accen ua ed by speci ic cha ac e is ics o ou ading pa ne s, such as hei
income le els and inancial de elopmen . We also explo e whe he FTAs can
ac as a coun e balance, mi iga ing he ad e se consequences o low le els o
inancial de elopmen and capi al accoun es ic ions.
One o he key deba es ega ding he e ec i eness o FTAs in Chile e ol es
a ound he issue o expo di e si ica ion and sophis ica ion. Some a gue ha
hese ag eemen s ha e no succeeded in di e si ying he Chilean economy,
which emains hea ily dependen on commodi ies like coppe (Pe es-Cajías
e al. (2021); Dingemans and Ross (2012)). Howe e , o he s con end ha ,
a e decades o a ying emphasis on ade policy, Chile’s pe o mance has
exceeded expec a ions based on i s undamen als. Lebdioui (2019) indica es
ha : “Chile has managed o di e si y and de elop new compe i i e sec o s by
being p oac i e”. A simila iew is sha ed by Salinas (2021), highligh ing he
inc ease in expo di e si ica ion and sophis ica ion in spi e o he dis ance o
wo ld ma ke s. Ou pape con ibu es o his deba e by p o iding e idence o
posi i e e ec s o FTAs no only on he alue o expo s bu also on he numbe
o expo ed p oduc s.
To explo e hese issues, we make use o a ich da ase ha encompasses
bila e al ade lows a he p oduc le el, supplemen ed by s anda d g a i y
indica o s and inancial da a. We apply a obus di e ence-in-di e ences ap-
p oach, capi alizing on he iming di e ences in he implemen a ion o FTAs
wi h a ious coun ies. Ou p ima y aim is o unco e he di e se impac s o
302 Es udios de Economía, Vol.51 - Nº 2
hese ag eemen s ac oss di e en indus ies and cha ac e is ics o ou ading
pa ne s, hus en iching ou comp ehension o Chile’s o e a ching ade policy.
Ou indings p o ide aluable insigh s in o he a ied e ec s o FTAs
ac oss di e en indus ies and a ibu es o ading pa ne s. We demons a e
ha he impac o FTAs a ies signi ican ly a he indus y le el, depending
on he ini ial expo sha e o each indus y. In e es ingly, his e ec ollows a
non-linea pa e n, wi h a mo e subs an ial posi i e impac obse ed o indus-
ies wi h lowe and in e media e ini ial expo sha es. In con as , indus ies
wi h expo sha es in he highe ange o he dis ibu ion expe ienced a nega-
i e impac , bo h in e ms o he alue o expo s and he numbe o expo ed
p oduc s. This pa e n aligns wi h he no ion ha high ini ial expo sha es
we e associa ed wi h adi ional expo s, whe e Chile (supposedly) possessed
signi ican compa a i e ad an ages. I sugges s ha hese sec o s, wi h well-es-
ablished compa a i e ad an ages, had al eady expe ienced g ow h be o e he
FTAs, while he FTAs played a c ucial ole in acili a ing he expansion o
new p oduc s/sec o s.
Fu he mo e, we del ed in o he ole o inancial de elopmen and he
p esence o capi al con ol es ic ions in shaping he epe cussions o FTAs
on expo s. This analysis is ela ed o he li e a u e explo ing he ela ionship
be ween expo s and inancial cons ain s. In hese heo ies, limi ed access o
inancing can p e en he en y o i ms in o in e na ional ma ke s (Chaney
(2016); Mano a (2013) and Feens a e al. (2014)). Ou indings un eiled ha
FTAs end o exe a mo e p onounced posi i e impac when linked wi h coun-
ies wi h ela i ely lowe le els o inancial de elopmen . Mo eo e , he ex-
is ence o capi al con ol es ic ions appea ed o ampli y he posi i e e ec s
o FTAs.
All in all, ou s udy con ibu es o he li e a u e by p o iding a comp e-
hensi e analysis o he mul i ace ed impac s o FTAs on Chilean expo s. Ou
indings highligh he subs an ial posi i e e ec s o FTAs on Chilean expo s,
ein o cing he a ionale behind Chile’s s a egic pu sui o hese ag eemen s.
By shedding ligh on indus y-speci ic impac s and elucida ing he oles o
inancial de elopmen and capi al con ols, ou indings en ich he b oade
comp ehension o he implica ions o ade libe aliza ion. This esea ch can
p o ide aluable guidance o policymake s as hey design and implemen e -
ec i e ade policies o s imula e expo g ow h and economic de elopmen .
The pape is s uc u ed as ollows: Sec ion 2 p esen s he ela ed li e a u e.
Sec ion 3 p esen s he da a and desc ibes he iden i ica ion s a egy used in his
s udy. In Sec ion 4, we p esen he main indings o ou analysis. Sec ion 5
explo es he ole o addi ional ma gins o he e ogenei y in shaping he e ec s
o he FTAs. Sec ion 6 p o ides se e al obus ness checks and ex ensions o
alida e he obus ness o ou esul s. Finally, Sec ion 7 concludes he pape ,
summa izing he key insigh s and discussing hei implica ions.
303
Explo ing he E ec s o FTAs on Chilean... / Robe o Al a ez, Eugenia And easen
2. RELATED LITERATURE
Wi hin he con ex o Chilean ade policy, a mul i ude o s udies ha e ex-
amined he in luence o F ee T ade Ag eemen s (FTAs) on he coun y’s expo
dynamics. Fo ins ance, Malho a and S oyano (2008) ound ha he FTA
be ween Chile and Canada led o a signi ican 35 pe cen inc ease in Chil-
ean ag icul u al expo s o Canada, a esul consis en wi h he obse a ions
o Wehne (2011), who conduc ed a desc ip i e analysis demons a ing expo
expansion in se e al sec o s ollowing he Chile-Canada FTA. Wehne (2011)
also ex ended his analysis o o he FTAs, e ealing ha Chile’s expo s sim-
ila ly inc eased in he wake o ag eemen s wi h coun ies such as he U.S.,
Mexico, Panama, Sou h Ko ea, Japan, and China.
In he Chilean con ex , se e al ex-an e e alua ions ha e been conduc ed
(Chumace o e al., 2004; Nowak-Lehmann D. e al., 2007). Fo ins ance, Chu-
mace o e al. (2004) pos ula e ha he FTA wi h he U.S. would no only ele-
a e ade lows and wel a e bu also diminish isk p emiums o he Chilean
economy. Examining he FTA wi h he Eu opean Union, Nowak-Lehmann D.
e al. (2007) p edic posi i e e ec s, especially in he ui indus y. Howe e ,
López Gi al e al. (2022) conclude ha he FTA wi h Ko ea did no signi ican -
ly con ibu e o di e si ying Chile’s expo po olio.
Tu ning o compu able gene al equilib ium models, Jean e al. (2014b) em-
ploy his me hodology o es ima e he impac o he FTA wi h he Eu opean
Union, e ealing a posi i e in luence on Chilean expo s. Employing a simila
app oach bu wi h a ocus on en i onmen al e ec s, O’Ryan e al. (2010) also
documen an expansion o Chilean expo s esul ing om ag eemen s wi h he
Eu opean Union and he Uni ed S a es. Fu he mo e, Heine (2016) del e in o
he epe cussions o he FTA wi h China, unco e ing a subs an ial su ge in
Chilean expo s.
Ou pape is mo e ela ed o he li e a u e o he e ogeneous e ec s o FTAs.
Se e al wo ks ha e looked a di e ences on impac depending on a iables
such as ade elas ici ies, dis ance, he exis ence o p e ious ag eemen s, he
ex-an e ade ba ie s. and he abili y o a ec ing e ms o ade (Jung (2023);
Baie e al. (2018); Baie e al. (2019))
While exis ing esea ch p o ides aluable insigh s in o he impac s o spe-
ci ic FTAs, his pape con ibu es o he li e a u e by o e ing a comp ehensi e
e alua ion o he e ec s o FTAs on Chilean expo s, encompassing di e se
indus ies and ading pa ne a ibu es. I ex ends beyond a single FTA o
p o ide a b oade unde s anding o Chile’s o e all ade policy s a egy and i s
implica ions o expo g ow h and di e si ica ion.
304 Es udios de Economía, Vol.51 - Nº 2
3. DATA AND EMPIRICAL STRATEGY
Fo he pu pose o his pape , we me ge wo da a se s. The i s da a se con-
ains in o ma ion on bila e al ade lows a he 6-digi p oduc le el ob ained
om he “In e na ional T ade Da abase a he P oduc -Le el (BACI)” p o ided
by he Cen e o P ospec i e S udies and In e na ional In o ma ion (CEPII).
This comp ehensi e da abase encompasses ade in o ma ion o mo e han
200 coun ies and 5,000 p oduc s spanning he pe iod om 1994 o 2007. Us-
ing his da ase , we cons uc ou a iables o in e es , including he o al alue
o Chilean expo s in dolla s and he numbe o expo ed p oduc s, ca ego ized
by wo-digi indus y o each ading pa ne .
We me ge he BACI da abase wi h he “G a i y” da abase, also sou ced
om CEPII, which includes s anda d g a i y indica o s such as income pe
capi a and popula ion. Addi ionally, we inco po a e da a on he a io o c edi
o he p i a e sec o o GDP om he Global Financial Da abase and he bila -
e al exchange a e wi h Chile om he WEO da abase, bo h p o ided by he
Wo ld Bank.
Finally, we inco po a e o he expo da abase, in o ma ion on he FTAs
signed by Chile om he Subsec e a ía de Relaciones Económicas In e na-
cionales de Chile. Since he e u n o democ acy, Chile has signed 31 FTAs,
co e ing 65 coun ies ha oge he ep esen almos 90% o he wo ld GDP.
Using his in o ma ion, we cons uc a dummy ha akes he alue o 1 om
he yea a e he ag eemen has been signed onwa ds.
Table 1 p esen s a summa y o he FTAs signed by Chile by coun y and
speci ying he yea in which i was implemen ed. Table 2 p esen s he sum-
ma y s a is ics o he main a iables a he indus y/coun y le el. Ou inal
sample has 112,867 obse a ions.
305
Explo ing he E ec s o FTAs on Chilean... / Robe o Al a ez, Eugenia And easen
TABLE 1
FTAS SIGNED BY CHILE SINCE 1995
Yea Coun ies
1997 U nguay, Pa aguay, B azil. A gen ina
1998 Canada
2000 Mexico
2002 Slo enia, C imea
2003 Sweeden, Po ugal. Ne he lands, Luxembu g, I aly, I eland. G eece, G ea B i -
ain,F ance. Finland, Spain. Denma k Deu schland, Belgium, Aus ia
2004 USA, Slo enia, Slo akia, Poland, Mal a, La ia, Li huania, Ko ea, Hunga y,
Es onia, Chezc Republic, Cyp us
2005 No way, Iceland, Swi ze land
2006 Singapu , New Zealand, B unci Da ussalam
2007 China, Bulga ia
2008 Panama, Japan
2009 Pe u, Hondu as, Colombia, Aus alia
2010 Gua emala
2011 Tu chia
2012 Malaysia
2013 Nica agua, C oa ia
2014 Vie nam
2013 Hong Kong
2020 Indonesia
TABLE 2
SUMMARY STATISTICS
Va iables (1)
N
(2)
Mean
(3)
SD
(4)
Min
(5)
Max
FTA 112,867 0.440 0.496 0 1
P oduc s 112,867 1.212 1.146 0 5.919
Expo s 112,867 4.154 3.633 -6.908 16.27
Popula ion 112,867 9.591 1.813 1.506 14.16
Income p.c. 112,867 9.715 1.018 5.455 11.70
Sha e_1996 112,867 0.015 0.038 0.000 0.269
High Income(Dummy) 112,867 0.481 0.500 0 1
Low Fin. De . (Dummy) 112,867 0.701 0.458 0 1
Cap.Con ol (Dummy) 112,867 0.786 0.410 0 1
No e: Expo s and p oduc s a e exp essed in logs. The o iginal uni o he a iable is housands o
dolla s o expo s and uni s o p oduc s.
306 Es udios de Economía, Vol.51 - Nº 2
3.1 Empi ical S a egy
The p ima y objec i e o his s udy is o explo e he e ec s o FTAs on
he alue o expo s and he numbe o expo ed p oduc s. Then ou baseline
eg ession conside s a di e ence in di e ences app oach o bila e al expo s:
(1) Ys,c, =α+βFTAc, +γXc, +ωs +ωc +ω +μs,c,
whe e s,c, s ands o indus y, coun y ( ade coun e pa ) and ime espec-
i ely. Ys,c, a e he speci ic dependen a iables o in e es : alue o expo s
and numbe o p oduc s in logs, FTAc, is a dummy ha akes he alue o one
o he pe iod a e he ag eemen was signed. Xc, is a g oup o ime- a ying
coun y con ol a iables based on he g a i y model ha include income pe
capi a and popula ion.1 The ω ep esen ixed e ec s by indus y s, coun y c
and ime . E o s a e clus e ed a he coun y- ime le el.
Addi ionally, we explo e whe he he ex-an e ela i e impo ance o each
sec o s’ expo s in o al expo s-which i is conside ed as a p oxy o compa -
a i e ad an age- plays a signi ican ole in shaping he indus y’s esponse o
he FTA. Few pape s ha e explo ed whe he compa a i e ad an age enhances
o amelio a es he e ec s o educ ion in ade ba ie s. Simila o ou es ima-
ions, Ahmed (2023) inds some weak e idence o his he e ogeneous impac
in he case o he FTA be ween China and Pakis an. To his end, we cons uc
he a iable Sha es which is he a e age sha e o expo s o he sec o wi h e-
spec o he o al in 1996, i.e., be o e any o he FTAs in ou sample was signed.
T adi ional indus ies may po en ially expe ience a di e en ial (lowe ) im-
pac om he FTAs due o hei p e-exis ing low a i s in des ina ion ma ke s.
Howe e , i is also plausible ha he impac could be highe in hese indus ies
i he e is an oppo uni y o in oduce new p oduc s in sec o s whe e he Chil-
ean economy holds a compa a i e ad an age. To disce n which o hese wo
channels is mo e ele an , we also es ima e he ollowing eg ession:
(2) Ys,c, = α+β1F T Ac, +β2F T Ac, ∗Sha es +β3F T Ac, ∗Sha e2s +γXc,
+ωs+ωc +ω +μs,c,
Whe e we include Sha es and Sha e2s o allow o non-linea i ies on he
impac o he in e ac ion. Ou baseline eg ession includes indus y, ading
pa ne and yea ixed e ec s.
1 In Table 7 we show ha hese esul s a e obus o including also p i a e c edi o GDP
and he bila e al exchange a e as addi ional con ols. Howe e , since by doing so we
lose almos hal o he obse a ions o he baseline.
313
Explo ing he E ec s o FTAs on Chilean... / Robe o Al a ez, Eugenia And easen
5.2 Can FTAs Help Compensa e o Low Le els o Financial De elopmen
o Capi al Accoun Res ic ions?
In his sec ion, we explo e in mo e de ail he ole o inancial de elop-
men and he p esence o capi al con ols in shaping he e ec s o he FTA.
As a gued by Mano a (2013), expo ing i ms ace ixed cos s ela ed o R&D,
p oduc de elopmen , ma ke ing, and in es men in equipmen . Addi ionally,
in e na ional ade is subjec o expo en y cos s, ixed expo cos s, and a i-
able ade cos s. Since many o hese cos s need o be paid up on , in e na ion-
al ade is mo e inancially in ensi e han domes ic sales (Leibo ici (2021)).
In his con ex , a pe inen ques ion a ises: Can FTAs e ec i ely mi iga e he
ad e se consequences a ising om weake inancial sys ems o capi al accoun
es ic ions on ade, as discussed by Mano a (2008)?
314 Es udios de Economía, Vol.51 - Nº 2
FIGURE 2
HETEROGENEOUS EFFECTS OF FTAS: COUNTRIES WITH DIFFERENT INCOME LEVELS
No e: Panel (a) depic s g aphically he eg ession esul s om columns (1) and (4) o Table 4 while Panel (b) depic s he eg ession esul s om columns (2) and (5) and Panel
(c) depic s he eg ession esul s om columns (3) and (6) o he same able. The e ical axis measu es he pe cen age change in he co esponding dependen a iable
igge ed by he FTA o each le el o Sha e, which is measu ed on he ho izon al axis. The solid and do ed lines show he es ima ed e ec o he FTA o each le el o
Sha e o he alue o expo s and numbe o p oduc s, espec i ely. The shaded a eas a e he co esponding 95 pe cen con idence in e als.
315
Explo ing he E ec s o FTAs on Chilean... / Robe o Al a ez, Eugenia And easen
5.2.1 Financial De elopmen and FTAs
To complemen he analysis o Table 3, Table 5 and Figu e 3 p esen he
esul s o ou baseline eg ession when di iding he sample be ween ading
pa ne s wi h high and low le els o inancial de elopmen .5
In he con ex o he alue o expo s, ou analysis e eals ha he de imen-
al impac on indus ies ep esen ing a la ge sha e o expo s is p edominan ly
associa ed wi h FTAs signed wi h coun ies wi h high le els o inancial de el-
opmen . Con e sely, when FTAs a e es ablished wi h coun ies ha ing lowe
le els o inancial de elopmen , he posi i e and signi ican e ec on he alue
o expo s pe sis s ac oss he en i e ange o he Sha e dis ibu ion. Fu he -
mo e, his segmen a ion highligh s ha he a o able impac o FTAs on he
numbe o p oduc s is p ima ily d i en by ag eemen s wi h ading pa ne s
cha ac e ized by lowe le els o inancial de elopmen . In con as , he e ec
on he numbe o p oduc s u ns nega i e ac oss he en i e Sha e dis ibu ion
when FTAs a e signed wi h coun ies possessing high le els o inancial de-
elopmen .6
5 Fo his pu pose, (as in Table 3) we u ilize he a io o domes ic c edi o he p i a e
sec o as a pe cen age o GDP, sou ced om he Global Financial Da abase o he
Wo ld Bank. We classi y coun ies wi h high inancial de elopmen as hose alling
wi hin he op qua ile o he dis ibu ion o his indica o a he ime he FTA was
signed, while he emaining coun ies o m he low inancial de elopmen g oup.
6 I ’s wo h no ing ha hese esul s emain obus when conside ing al e na i e mea-
su es o inancial de elopmen .
TABLE 5
HETEROGENEOUS EFFECTS OF FTAS: FINANCIAL DEVELOPMENT
Va iables
(1)
Expo s
H. Fin. De
(2)
Expo s
L. Fin. De
(3)
P oduc s
H. Fin. De
(3)
P oduc s
L. Fin. De
FTA -0.088
(0.063)
-0.052
(0.050)
-0.039
(0.025)
0.090***
(0.025)
FTA*Sha e_1996 21.193***
(2.613)
11.684***
(2.000)
0.277
(0.677)
3.389***
(0.520)
FTA*Sha e_19962-95.137***
(9.407)
-19.483**
(7.668)
-7.828***
(2.473)
-12.676***
(2.029)
Obse a ions 33,695 79,172 33,695 79,172
R-squa ed 0.570 0.519 0.632 0.613
Con ols YES YES YES YES
Indus y FE YES YES YES YES
Coun y FE YES YES YES YES
Yea FE YES YES YES YES
No e: This able examines he e ec o FTAs and he in e ac ion o FTA wi h Sha es on he alue
o expo s and numbe o expo ed p oduc s a he indus y le el while di iding he sample
be ween coun ies wi h High-Financial de elopmen , columns (1) and (2), and Low-Financial
de elopmen , columns (3) and (4). All eg essions include indus y coun y and ime- ixed
e ec s. Robus e o s clus e ed a he coun y-yea le el a e epo ed in pa en hesis. ***, **,
and * indica e signi icance a he 1%, 5%, and 10% le el, espec i ely.
316 Es udios de Economía, Vol.51 - Nº 2
FIGURE 3
FTAS AND FINANCIAL DEVELOPMENT
5.2.2 Capi al Con ols and FTAs
As poin ed ou by Tami isa (1998), capi al con ols can ha e a nega i e
in luence on in e na ional ade by a ec ing ansac ion cos s, exchange a es,
o eign exchange isk hedging, and ade inancing. We ha e al eady shown
in a i s app oxima ion in Table 3 ha FTAs seem o be mo e bene icial when
signed wi h ading pa ne s ha had CCs in place. Table 6 and Figu e 4 u he
explo e his channel by eplica ing ou baseline eg ession while di iding he
sample be ween hose coun ies wi h and wi hou capi al con ols. In line wi h
ou indings when conside ing coun ies wi h di e en le els o inancial de-
elopmen , we ind ha he bene icial e ec s o CCs a e mos ly concen a ed
in hose FTAs signed wi h coun ies ha had CCs in place.
No e: Panel (a) depic s g aphically he eg ession esul s om columns (1) and (3) o Table 5 while
Panel (b) depic s he eg ession esul s om columns (2) and (4) o he same able. The e ical
axis measu es he pe cen age change in he co esponding dependen a iable igge ed by he
FTA o each le el o Sha e, which is measu ed on he ho izon al axis. The solid and do ed
lines show he es ima ed e ec o he FTA o each le el o Sha e o he alue o expo s
and numbe o p oduc s, espec i ely. The shaded a eas a e he co esponding 95 pe cen
con idence in e als.
317
Explo ing he E ec s o FTAs on Chilean... / Robe o Al a ez, Eugenia And easen
TABLE 6
EFFECTS OF FTAS AND CAPITAL CONTROLS
Ou in e p e a ion o hese indings aligns wi h he no ion ha in e na ional
ade, inhe en ly bu dened by ade cos s and delayed paymen s, is mo e sus-
cep ible o inancial cons ain s compa ed o domes ic ansac ions. This in-
sigh leads us o an icipa e ha ade expansion aces limi a ions imposed by
inancial ic ions. Le ’s conside a scena io whe e a Chilean p oduc ecei es
a ade p e e ence. The ques ion a ises: In which coun y should we an icipa e
a mo e subs an ial inc ease in expo s?
We hypo hesize ha ade p e e ences disp opo iona ely impac expo s
des ined o coun ies acing highe inancial cons ain s. This is g ounded in
he idea ha , in coun ies wi h be e c edi access, expo e s encoun e ewe
limi a ions om inancial ic ions, esul ing in expo s being less bene i ed by
a i educ ions. Ou empi ical indings align wi h his a ionale. The posi i e
e ec s o F ee T ade Ag eemen s (FTAs) a e mo e p onounced when es ab-
lished wi h coun ies expe iencing g ea e inancial cons ain s. This sugges s
ha FTAs, by educing cos s and enhancing inancial linkages, play a c ucial
ole in acili a ing ade wi h mo e cons ained economies.
No e: This able examines he e ec o F T As and he in e ac ion o F T A wi h sha es on he alue o
expo s and numbe o expo ed p oduc s a he indus y le el. All eg essions include indus y-
ixed e ec s, and ei he coun y and ime- ixed e ec s o coun y- ime ixed e ec s. Robus
e o s clus e ed a he coun y-yea le el a e epo ed in pa en hesis. ***, **, and * indica e
signi icance a he 1%, 5%, and 10% le el, espec i ely.
Va iables
(1)
Expo s
Wi hou CC
(2)
Expo s
Wi h CC
(3)
P oduc s
Wi hou CC
(4)
P oduc s
Wi h CC
FTA -0.112
(0.076)
0.009
(0.044)
-0.099***
(0.030)
0.059***
(0.018)
FTA*Sha e_1996 12.734***
(3.754)
17.162***
(1.798)
-1.508
(0.934)
4.085***
(0.464)
FTA*Sha e_19962-55.406***
(13.062)
-48.029***
(6.975)
3.167
(3.442)
-17.496***
(1.795)
Obse a ions 24,123 88,743 24,123 88,473
R-squa ed 0.534 0.535 0.652 0.610
Indus y FE YES YES YES YES
Coun y FE YES YES YES YES
Yea FE YES YES YES YES
318 Es udios de Economía, Vol.51 - Nº 2
6. ROBUSTNESS AND EXTENSIONS
6.1 Excluding Coppe and Main Expo Des ina ions
Chile s ands as he wo ld’s o emos expo e o coppe . Gi en his signi i-
can con ibu ion, coppe ep esen s a subs an ial po ion o Chilean expo s,
accoun ing o app oxima ely 40% o 50% o he coun y’s o al expo alue
in ecen yea s. To ensu e ha ou indings a e no d i en by coppe expo s, we
conduc an addi ional analysis by excluding coppe om ou sample. Columns
(1) and (2) o Table 7, demons a e ha ou baseline esul s emain quali a-
i ely unchanged when coppe is excluded om he indus ies in he sample.
This obus ness check alida es he eliabili y o ou indings and con i ms ha
coppe expo s alone do no in luence ou conclusions.
Following he same logic, columns (3) and (4) o he same able eplica e
ou baseline eg essions while lea ing ou Chile’s main ading pa ne s: China
and he US, which oge he ep esen o e 50% o Chile’s expo s. The es ima-
ions show ha ou esul s a e no d i en by hese coun ies ei he .
FIGURE 4
FTAS AND CAPITAL CONTROLS
No e: Panel (a) depic s g aphically he eg ession esul s om columns (1) and (3) o Table 5 while
Panel (b) depic s he eg ession esul s om columns (2) and (4) o he same able. The e ical
axis measu es he pe cen age change in he co esponding dependen a iable igge ed by he
FTA o each le el o Sha e, which is measu ed on he ho izon al axis. The solid and do ed
lines show he es ima ed e ec o he FTA o each le el o Sha e o he alue o expo s
and numbe o p oduc s, espec i ely. The shaded a eas a e he co esponding 95 pe cen
con idence in e als.
319
Explo ing he E ec s o FTAs on Chilean... / Robe o Al a ez, Eugenia And easen
6.2 Addi ional Con ols
In ou baseline eg essions, we inco po a ed con ol a iables such as in-
come pe capi a and he ading pa ne ’s popula ion. Addi ionally, we con-
duc ed a obus ness check by in oducing coun y- ime ixed e ec s in o ou
model, which had no impac on he poin es ima es o he in e ac ion. Howe e ,
in Columns (5) and (6) o Table 7, we ex end ou analysis by including supple-
men a y con ols, speci ically p i a e c edi o GDP and he bila e al exchange
a e wi h he ading pa ne . Al hough hese con ols do no a ec he poin es-
ima e o he in e ac ion, hey esul in a signi ican educ ion in he numbe o
obse a ions, wi h almos hal o ou da a being los . Consequen ly, we made
he decision o exclude hese addi ional con ols om ou baseline eg ession
o main ain a la ge sample size, ensu ing he obus ness and eliabili y o ou
esul s.
6.3 P e ends
One o he essen ial assump ions o a di e ence-in-di e ence es ima ion
is ha p e-exis ing ends a e compa able be ween he ea men and con ol
g oups, which, in his con ex , co esponds o coun ies wi h an FTA and hose
wi hou . We can assess his assump ion by inco po a ing lagged dummy a i-
ables o he FTAs. I expo s and p oduc ends we e e ol ing simila ly o
bo h g oups, he coe icien s o he lagged a iables should no signi ican ly
di e om ze o. The esul s in Columns (7) and (8) o Table 7 indica e ha
p e ious ends a e indeed simila . We ind no signi ican e idence o ejec
he hypo hesis ha each pa ame e o he lagged FTA a iable equals ze o.
The e o e, i appea s easonable o conclude ha he iden i ica ion assump ion
is sa is ied.
320 Es udios de Economía, Vol.51 - Nº 2
TABLE 7
ROBUSTNESS
No e: This able examines he e ec o F T As and he in e ac ion o F T A wi h sha es on he alue o expo s and numbe o expo ed p oduc s a he indus y le el. All
eg essions include indus y- ixed e ec s, and ei he coun y and ime- ixed e ec s o coun y- ime ixed e ec s. Robus e o s clus e ed a he coun y-yea le el a e
epo ed in pa en hesis. ***, **, and * indica e signi icance a he 1%, 5%, and 10% le el, espec i ely.
Va iables
(1)
No Coppe
Expo s
(2)
No Coppe
P oduc s
(3)
No CHN-USA
Expo s
(4)
No CHN-USA
P oduc s
(5)
Ex a Con ols
Expo
(6)
Ex a Con ols
P oduc s
(7)
P e end Expo s
(8)
P e end P oduc s
FTA -0.083**
(0.036) 0.016
(0.016) -0.087**
(0.036) 0.029*
(0.016) -0.067
(0.047) -0.000
(0.019) -0.100*
(0.051) 0.040*
(0.022)
FTA*Sha e_1996 27.054***
(2.664) 6.363***
(0.608) 16.475***
(1.641) 3.153***
(0.423) 16.380***
(2.122) 2.331***
(0.529) 17.013***
(1.612) 3.018***
(0.0412)
FTA*Sha e_19962-150.793***
(19.447) -46.037***
(4.393) -52.210***
(6.339) -14.209***
(1.635) -39.122***
(8.117) -10.825***
(2.021) -53.223***
(6.149) -13.608***
(1.586)
FTA_1 0.008
(0.063) 0.024
(0.029)
FTA_2 -0.043
(0.061) -0.015
(0.028)
FTA_3 -0.095
(0.069) 0.03
(0.031)
FTA_4 -0.047
(0.075) 0.037
(0.028)
FTA_5 -0.009
(0.065) 0.046
(0.029)
P i . C edi /GDP -0.001**
(0.001) -0.001***
(0.000)
Bila e al ExR 0.455***
(0.107) 0.143***
(0.039)
Obse a ions 111,465 111,465 108,928 108,928 68,825 68,825 112,867 112,867
R-squa ed 0.530 0.615 0.519 0.608 0.512 0.631 0.532 0.615
Con ols YES YES YES YES YES YES YES YES
Indus y FE YES YES YES YES YES YES YES YES
Coun y FE YES YES YES YES YES YES YES YES
Yea FE YES YES YES YES YES YES YES YES
321
Explo ing he E ec s o FTAs on Chilean... / Robe o Al a ez, Eugenia And easen
7. CONCLUSION
In his pape , we examine he impac s o F ee T ade Ag eemen s (FTAs) on
Chilean expo s. Chile’s ex ensi e engagemen in FTAs wi h a ious na ions
has been s a egically aimed a inc easing expo s, bols e ing p oduc di e si-
ica ion and expanding ma ke access. Howe e , un il now, a comp ehensi e
e alua ion o he collec i e impac o hese ag eemen s on Chilean expo s was
la gely absen .
To explo e hese issues, we make use o a ich da ase ha encompasses
bila e al ade lows a he p oduc le el, supplemen ed by s anda d g a i y
indica o s and inancial da a. We apply a obus di e ence-in-di e ences ap-
p oach, capi alizing on he iming di e ences in he implemen a ion o FTAs
wi h a ious coun ies.
Ou indings p o ide aluable insigh s in o he a ied e ec s o FTAs
ac oss di e en indus ies and a ibu es o ading pa ne s. We demons a e
ha he impac o FTAs a ies signi ican ly a he indus y le el, depending
on he ini ial expo sha e o each indus y. In e es ingly, his e ec ollows a
non-linea pa e n, wi h a mo e subs an ial posi i e impac obse ed o indus-
ies wi h lowe and in e media e ini ial expo sha es.
Fu he mo e, we del ed in o he ole o inancial de elopmen and he
p esence o capi al con ol es ic ions in shaping he epe cussions o FTAs
on expo s. The indings un eiled ha FTAs end o exe a mo e p onounced
posi i e impac when inked wi h coun ies possessing ela i ely lowe le els o
inancial de elopmen . Mo eo e , he exis ence o capi al con ol es ic ions
appea ed o ampli y he posi i e e ec s o FTAs.
In conclusion, ou s udy highligh s he subs an ial posi i e e ec s o FTAs
on Chilean expo s, ein o cing he a ionale behind Chile’s s a egic pu sui
o hese ag eemen s. By shedding ligh on indus y-speci ic impac s and he
oles o inancial de elopmen and capi al con ols, ou indings con ibu e o
imp o e ou unde s anding o he implica ions o ade libe aliza ion. This e-
sea ch can p o ide aluable guidance o policymake s.
322 Es udios de Economía, Vol.51 - Nº 2
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