Preference utilization in the global economy

This paper analyses the determinants of preference utilization using a novel WTO dataset that allows us to measure the underutilization of preferences across several importers, exporters and products over time. Building on the previous literature, we confirm that preference utilization is increasing with the size of exports, preference margin and geographical and linguistic proximity. We find that utilization rates tend to be higher for reciprocal preferences compared to non-reciprocal preferences, and that the incentive to use preferences increases with the share of competitors’ exports that is eligible for preferential treatment.