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This paper analyzes the distributional welfare impact of trade liberalization reforms on heterogeneous households. We develop a static applied general equilibrium model, and using a Social Accounting Matrix and Household Expenditure Survey, we calibrate it to match Slovenian data. We simulate the case of Slovenia joining the EU and quantify its welfare impact on households that differ in terms of age, income, and education. Additionally, we compare this benchmark case with two alternative scenarios: (1) a free trade agreement between Slovenia and the EU and (2) a custom union arrangement where tariff revenues are rebated proportionally to the households. We find that while trade liberalization leads to falling consumer prices, increased production in the export sectors, and aggregate welfare gains, the differentiated welfare impacts across heterogeneous households vary in their degrees. (JEL D58, F14, F15)

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We analyze the exports trade margins dynamics for ten transition countries, both at the industry and product level, during the period of accession to the EU. We find that trade along both margins was driven by only about 1% of almost 5000 (HS 6-digit) products. Moreover, the largest intensive and extensive margin gains were mostly concentrated around the same subset of sectors. Last, we find a positive correlation between productivity growth and the extensive margin across the transition economies.

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