Export Performance and Trade Facilitation Reform: Hard and Soft Infrastructure*Author(s):
Alberto Portugal-Perez, John S. Wilson
World Development Volume 40, Issue 7, Pages 1295–1307, July 2012
We estimate the impact of aggregate indicators of “soft” and “hard” infrastructure on the exportperformance of developing countries. We derive four new indicators for more than 100 countries over the period 2004–07. Estimates show that tradefacilitationreforms do improve the exportperformance of developing countries. This is particularly true with investment in physical infrastructure and regulatory reform to improve the business environment. The findings provide evidence that the marginal effect of the transport efficiency and business environment improvement on exports appears to be decreasing in per capita income. In contrast, the impact of physical infrastructure and information and communications technology on exports appears increasingly important the richer a country becomes. We also find statistical evidence on the complementarity between hard infrastructure and soft infrastructure, as captured by our indicators. Finally, drawing on estimates, we compute illustrative ad-valorem equivalents of improving each indicator halfway to the level of the top performer in the region.
Institutional Quality and International TradeAuthor(s):
Andrei A. Levchenko
Review of Economic Studies 74: 791–819, 2007
Institutions-quality of contract enforcement, property rights, shareholder protection, and the like-have received a great deal of attention in recent years. Yet trade theory has not considered the implications of institutional differences, beyond treating them simply as different technologies or taxes. The purpose of this paper is twofold. First, we propose a simple model of international trade in which institutional differences are modelled within the framework of incomplete contracts. We show that doing so reverses many of the conclusions obtained by equating institutions with productivity. Institutional differences as a source of comparative advantage imply, among other things, that the less developed country may not gain from trade and factor prices may actually diverge as a result of trade. Second, we test empirically whether institutions act as a source of trade, using data on U.S. imports disaggregated by country and industry. The empirical results provide evidence of "institutional content of trade": institutional differences are an important determinant of trade flows.
Market Entry Costs, Producer Heterogeneity, and Export DynamicsAuthor(s):
Sanghamitra Das , Mark J. Roberts and James R. Tybout
Econometrica, Volume 75 Issue 3, Pages 837 - 873, 2010
As the exchange rate, foreign demand, and production costs evolve, domestic producers are continually faced with two choices: whether to be an exporter and, if so, how much to export. We develop a dynamic structural model of export supply that characterizes these two decisions. The model embodies plant-level heterogeneity in export profits, uncertainty about the determinants of future profits, and market entry costs for new exporters. Using a Bayesian Monte Carlo Markov chain estimator, we fit this model to plant-level panel data on three Colombian manufacturing industries. We obtain profit function and sunk entry cost coefficients, and use them to simulate export responses to shifts in the exchange-rate process and several types of export subsidies. In each case, the aggregate export response depends on entry costs, expectations about the exchange rate process, prior exporting experience, and producer heterogeneity. Export revenue subsidies are far more effective at stimulating exports than policies that subsidize entry costs.
Anderson, J.E. and E. van Wincoop
Journal of Economic Literature, vol. 42, No. 3; pp. 691-751, 2004
This paper surveys the measurement of trade costs — what we know, and what we don’t know but may usefully attempt to find out. Partial and incomplete data on direct measures of costs go together with inference on implicit costs from trade flows and prices. Total trade costs in rich countries are large. The ad valorem tax equivalent is about 170% when pushing the data very hard. Poor countries face even higher trade costs. There is a lot of variation across countries and across goods within countries, much of which makes economic sense. Theory looms large in our survey, providing interpretation and perspective on the one hand and suggesting improvements for the future on the other hand. Some new results are presented to apply and interpret gravity theory properly and to handle aggregation appropriately.
Trade Policy, Trade Costs, and Developing Country Trade*Author(s):
Bernard Hoekman, Alessandro Nicita
World Development Volume 39, Issue 12, Pages 2069–2079, December 2011
This paper reviews some indices of trade restrictiveness and trade facilitation and compares the trade impact of different types of trade restrictions applied at the border with the effects of domestic policies that affect tradecosts. Based on a gravity regression framework, the analysis suggests that tariffs and non-tariff measures continue to be a significant source of trade restrictiveness for low-income countries despite preferential access programs. The results also suggest that behind-the-border measures to improve logistics performance and facilitate trade are likely to have a comparable, if not larger, effect in expanding developingcountrytrade, especially exports.
Trade, Regulations, and Income Author(s):
Caroline Freund and Bineswaree Bolaky
Journal of Development Economics, Volume 87, Issue 2, October 2008, Pages 309-321
We examine the relationship between openness and per-capita income using cross-country data from 126 countries. We find that trade leads to a higher standard of living in flexible economies, but not in rigid economies. Business regulation, especially on firm entry, is more important than financial development, higher education, or rule of law as a complementary policy to trade liberalization. Specifically, after controlling for the standard determinants of per-capita income, our results imply that a 1% increase in trade is associated with more than a one-half percent rise in per-capita income in economies that facilitate firm entry, but has no positive income effects in more rigid economies. The findings are consistent with Schumpeterian “creative destruction”, which highlights the importance of new business entry in economic performance, and with previous firm-level studies showing that the beneficial effects of trade liberalization come largely from an intra-sectoral reallocation of resources.
Trading on Time Author(s):
Simeon Djankov, Caroline Freund, and Cong S. Pham
Review of Economics and Statistics, Vol. 92, No. 1, Pages 166-173: 166-173, 2010
We determine how time delays affect international trade, using newly collected data on the days it takes to move standard cargo from the factory gate to the ship in 98 countries. We estimate a difference gravity equation that controls for remoteness, and find significant effects of time costs on trade. We find that each additional day that a product is delayed prior to being shipped reduces trade by more than one percent. Put differently, each day is equivalent to a country distancing itself from its trade partners by about 70 km on average. We control for potential endogeneity using a sample of landlocked countries and instrument for time delays with export times that occur in neighboring countries. We also find that delays have an even greater impact on exports of time-sensitive goods, such as perishable agricultural products. Our results highlight the importance of reducing trade costs (as opposed to tariff barriers) to stimulate exports.
Transportation Costs and International Trade Over Time Author(s):
Journal of Economic Perspectives 21(3): 131–154, 2007
While the precise causes of postwar trade growth are not well understood, declines in transport costs top the lists of usual suspects. However, there is remarkably little systematic evidence documenting the decline. This paper brings to bear an eclectic mix of data in order to provide a detailed accounting of the time-series pattern of shipping costs. The ad-valorem impact of ocean shipping costs is not much lower today than in the 1950s, with technological advances largely trumped by adverse cost shocks. In contrast, air shipping costs have dropped an order of magnitude, and airborne trade has grown rapidly as a result. As a result, international trade has also experienced a significant rise in speed.