Decomposition of extensive and intensive margin impacts of trade policies

Xin Zhao, Jeff Luckstead, Stephen Devadoss

Research output: Contribution to journalArticlepeer-review


Using a multi-region heterogeneous-firm trade model, this paper develops a method to decompose volumes and values of domestic sales, bilateral trade, total production and consumption into their intensive and extensive margins. With the free-entry condition, the extensive margin is further decomposed into two subcategories: operating-extensive margin and entrance/exit-extensive margin. This method can provide ex ante predictions on gains and losses in the margins of member and nonmember countries following a trade agreement. We apply our decomposition methods to quantitatively analyse the impacts of CETA between Canada and the European Union on the world processed food industry.

Original languageEnglish
Pages (from-to)971-1020
Number of pages50
JournalWorld Economy
Issue number4
StatePublished - Apr 2022


  • decomposition
  • extensive margin
  • intensive margin
  • monopolistic competition
  • trade agreement


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