Seminario CEDE - Mateo Hoyos

We study the dynamic effects of trade liberalization on structural change and growth for a developing economy at the municipal level. We exploit exogenous tariff reductions introduced by the FTA between Colombia and the US in 2012. By relying on a quasi-experimental shift-share research design, operationalized through local projections difference-in-differences (LP-DiD), we show that municipalities facing higher tariff reductions are characterized by lower total and GDP per capita. We argue and provide evidence that a key mechanism through which this instance of trade liberalization operated was regressive structural change: municipalities facing higher tariff reductions are characterized by lower manufacturing shares in GDP.