Do preferential trade agreements stimulate high-tech exports for low-income countries?

The literature is silent on how preferential trade agreements (PTAs) affect the types of products that developing countries export. Motivated by the studies suggesting a positive causal relationship between productivity embedded in export products and economic growth, we investigate whether PTAs encourage developing countries to export higher-technology products. Using Harmonized System (HS) 6-digit product-level data for 190 countries from 1996 to 2015, we find that low-income countries increase medium-technology exports while decreasing low-technology products under a PTA with more advanced countries. These results indicate an affirmative role of PTAs in their future economic performance. Our results also show that for middle-income countries, PTA trade effects on the intensive and extensive margins imply that which country they sign a PTA with may matter with regard to the channels through which the PTA can affect their future economic performance. •We examine whether PTAs encourage developing countries to export high-tech products.•PTAs affect the types of products that developing countries export.•Low-income countries export fewer low-tech and more medium-tech products with a PTA.•Effects through comparative advantage are dominated by other channels.•PTAs play an affirmative role in the future performance of low-income countries.