Quantifying the impact of trade liberalization on Lao imports (evidence from product-level data)

In pursuing economic development after market-oriented reforms, Lao PDR has actively liberalized imports through engagement in regional and multilateral trade agreements. However, a substantial research gap exists in assessing the impact of this liberalization, especially in terms of ex-post empirical studies, which are essential for nuanced policy evaluation. This study aims to thoroughly quantify the impact of tariff liberalization on Lao imports, specifically examining how the elimination of tariffs under regional trade and multilateral trade schemes affects Lao imports. In this study, a balanced gravity panel dataset at a product level from 2013 to 2022 was constructed using data from the Lao Official Import Management Database for a standard gravity model analysis. Results of this analysis reveal that tariff liberalization has significantly boosted Lao imports with an elasticity of -0.327. Counterfactual analysis strengthens this finding, indicating an approximate 6.7% increase in the average value of imports from 2018 to 2022.