Disentangling trade reform impacts on firm market and production decisions

This paper disentangles the impacts of trade liberalization on firm market and production decisions. Using firm-product data for Ecuador, we exploit exogenous tariff changes at entry to World Trade Organization find positive effects revenue total factor productivity (TFP-R). Input-trade improves efficiency, measured by quantity (TFP-Q) leads firms raise their markups introduce new products following an increase in imported input quality. Output-trade also efficiency raises marginal costs as quality improve core products. Firms’ product scope decrease. Chinese imports contributed positively while exchange rate's volatility prior dollarization had reverse effects. We welfare consumers were offered better cheaper benefited more productive or less likely exit.