Statement on Doing Business Data Corrections and Findings of Internal Audit. Read our statement

Research on Trading across Borders

Doing Business considers the following list of papers as relevant for research on trading across borders. Some papers—denoted with an asterisk (*)—use Doing Business data for their empirical analysis. If we've missed any important research, please let us know.


  • Policy and Performance in Customs. Evaluating the Trade Facilitation Agreement

    Author(s) : Hillberry, Russell and Xiaohui Zhang Journal : Policy Research working paper 7211, World Bank Abstract : The 2013 World Trade Organization ministerial in Bali produced a comprehensive framework agreement on trade facilitation. If fully implemented, the agreement should increase the speed and reduce the cost of moving goods across international borders. But which reforms are most likely to improve these outcomes, how much improvement should be expected, and what might such improvements be worth? This paper adopts the Organisation for Economic Co-operation and Development's trade facilitation indicators as quantitative descriptions of trade facilitation policy. It estimates the impact of the indicators and other variables on the time necessary to clear customs, the associated cost, and a customs performance index. Of the 12 policy bundles, the good governance and impartiality indicator is most clearly related to customs clearance time. A move to best practice in all policies by all World Trade Organization members would reduce the predicted time spent in customs by an average of 1.6 days for imports and 2 days for exports. Using a conservative estimate of the value of time in trade, such comprehensive reforms imply a mean tariff equivalent reduction of 0.9 percentage points on imports and 1.2 percentage points on exports. The same estimates are used to calculate welfare gains of policy reform by World Trade Organization members. Reform in China alone accounts for roughly one-fourth of the global benefits from the Trade Facilitation Agreement.

  • Trade costs

    Author(s) : Anderson, J.E. and E. van Wincoop Journal : Journal of Economic Literature, vol. 42, No. 3; pp. 691-751, 2004 Abstract : 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.

  • Port efficiency, maritime transport costs and bilateral trade

    Author(s) : Ximena Clark, David Dollar, Alejandro Micco Journal : Journal of development economics 75(2): 417-50 Abstract : Recent literature has emphasized the importance of transport costs and infrastructure in explaining trade, access to markets, and increases in per capita income. For most Latin American countries, transport costs are a greater barrier to U.S. markets than import tariffs. We investigate the determinants of shipping costs to the U.S. with a large database of more than 300,000 observations per year on shipments of products aggregated at six-digit HS level from different ports around the world. Distance volumes and product characteristics matter. In addition, we find that ports efficiency is an important determinant of shipping costs. Improving port efficiency from the 25th to the 75th percentile reduces shipping costs by 12 percent. (Bad ports are equivalent to being 60% farther away from markets for the average country.) Inefficient ports also increase handling costs, which are one of the components of shipping costs. Reductions in country inefficiencies associated to transport costs from the 25th to 75th percentiles imply an increase in bilateral trade of around 25 percent. Finally, we try to explain variations in port efficiency and find that they are linked to excessive regulation, the prevalence of organized crime, and the general condition of the country's infrastructure.

  • Institutional quality and international trade

    Author(s) : Andrei A. Levchenko Journal : Review of Economic Studies (2007) 74, 791?819 Abstract : 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"

  • Trade effects of customs reform: evidence from Albania

    Author(s) : Fernandes, Ana Margarida; Hillberry, Russell; Mendoza Alcantara, Alejandra Journal : Policy Research working paper 7210, World Bank Abstract : Despite enormous academic interest in international trade costs and keen policy interest in efforts to mitigate them, so far there is very little hard evidence on the impacts of trade facilitation efforts. This paper exploits a dramatic reduction in the rate of physical inspections by Albanian customs to estimate the effects of fewer inspection-related delays on the level and composition of imports. In this setting, the paper finds evidence that the expected median number of days spent in Albanian customs falls by 7 percent when the probability that a shipment is inspected falls from 50 percent or more to under 50 percent. In turn, this reduction in time produces a 7 percent increase in import value. The paper finds evidence that the reforms favored imports from preferential trading partners, especially the European Union. There are also reform-induced changes in the composition of trade, including increases in average quantities and unit prices, the number of shipments, and the number of importing firms per product-country pair and the number of countries per firm-product pair. A back-of-the-envelope calculation suggests that the estimate of 7 percent import growth along an intensive margin is roughly consistent with a 0.36 percentage point reduction in average tariff equivalent trade costs. Applying this figure to the value of Albania's non-oil imports produces a reform-induced trade cost savings estimate of approximately US$12 million in 2012.

  • The Impacts of Trade Facilitation Measures on International Trade Flows

    Author(s) : Sá Porto, Paulo C.; Morini, Cristiano; and Canuto, Otaviano Journal : Policy Research working paper 7367, World Bank Abstract : This paper analyzes the impacts of selected trade facilitation measures on international trade flows. A gravity model is used to estimate four equations

  • Market entry costs, producer heterogeneity, and export dynamics

    Author(s) : Sanghamitra Das , Mark J. Roberts and James R. Tybout Journal : Econometrica, Volume 75 Issue 3,Pages837-873, 2010 Abstract : As the exchange rate, foreign demand, and production costs evolve, domestic producers are continually faced with two choices

  • Export performance and trade facilitation reform: hard and soft infrastructure

    Author(s) : Portugal-Perez, Alberto; Wilson, John S. Journal : World Development, Volume 40, Issue 7, Pages 1295-1307, July 2012 Abstract : We estimate the impact of aggregate indicators of "soft" and "hard" infrastructure on the export performance of developing countries. We derive four new indicators for more than 100 countries over the period 2004-07. Estimates show that trade facilitation reforms do improve the export performance 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.

  • Port efficiency, maritime transport costs and bilateral trade

    Author(s) : Ximena Clark, David Dollar, Alejandro Micco Journal :  Journal of Development Economics Abstract : Recent literature has emphasized the importance of transport costs and infrastructure in explaining trade, access to markets, and increases in per capita income. For most Latin American countries, transport costs are a greater barrier to U.S. markets than import tariffs. We investigate the determinants of shipping costs to the U.S. with a large database of more than 300,000 observations per year on shipments of products aggregated at six-digit HS level from different ports around the world. Distance volumes and product characteristics matter. In addition, we find that ports efficiency is an important determinant of shipping costs. Improving port efficiency from the 25th to the 75th percentile reduces shipping costs by 12 percent. (Bad ports are equivalent to being 60% farther away from markets for the average country.) Inefficient ports also increase handling costs, which are one of the components of shipping costs. Reductions in country inefficiencies associated to transport costs from the 25th to 75th percentiles imply an increase in bilateral trade of around 25 percent. Finally, we try to explain variations in port efficiency and find that they are linked to excessive regulation, the prevalence of organized crime, and the general condition of the country's infrastructure.

  • Trade Effects of Customs Reform: Evidence from Albania

    Author(s) : Fernandes, Ana Margarida, Russell Henry Hillberry, and Alejandra Mendoza Alcantara Journal : World Bank Policy Research Working Paper Abstract : Despite enormous academic interest in international trade costs and keen policy interest in efforts to mitigate them, so far there is very little hard evidence on the impacts of trade facilitation efforts. This paper exploits a dramatic reduction in the rate of physical inspections by Albanian customs to estimate the effects of fewer inspection-related delays on the level and composition of imports. In this setting, the paper finds evidence that the expected median number of days spent in Albanian customs falls by 7 percent when the probability that a shipment is inspected falls from 50 percent or more to under 50 percent. In turn, this reduction in time produces a 7 percent increase in import value. The paper finds evidence that the reforms favored imports from preferential trading partners, especially the European Union. There are also reform-induced changes in the composition of trade, including increases in average quantities and unit prices, the number of shipments, and the number of importing firms per product-country pair and the number of countries per firm-product pair. A back-of-the-envelope calculation suggests that the estimate of 7 percent import growth along an intensive margin is roughly consistent with a 0.36 percentage point reduction in average tariff equivalent trade costs. Applying this figure to the value of Albania's non-oil imports produces a reform-induced trade cost savings estimate of approximately US$12 million in 2012

  • Export performance and trade facilitation reform : hard and soft infrastructure

    Author(s) : Portugal-Perez, Alberto; Wilson, John S. Journal : Policy Research Working Paper 5261, World Bank Abstract : The authors estimate the impact of aggregate indicators of "soft" and "hard" infrastructure on the export performance of developing countries. They build four new indicators for 101 countries over the period 2004-07. Estimates show that trade facilitation reforms do improve the export performance of developing countries. This is particularly true with investment in physical infrastructure and regulatory reform to improve the business environment. Moreover, the findings provide evidence that the marginal effect of infrastructure improvement on exports appears to be decreasing in per capita income. In contrast, the impact of information and communications technology on exports appears increasingly important for richer countries. Drawing on estimates, the authors compute illustrative exports growth for developing countries and ad-valorem equivalents of improving each indicator halfway to the level of the top performer in the region. As an example, improving the quality of physical infrastructure so that Egypt's indicator increases half-way to the level of Tunisia would increase exports by 10.8 percent. This is equivalent to a 7.4 percent cut in tariffs faced by Egyptian exporters across importing markets.

  • Trade effects of customs reform: evidence from Albania

    Author(s) : Fernandes, Ana Margarida; Hillberry, Russell; Mendoza Alcantara, Alejandra Journal : World Bank Group Abstract : Despite enormous academic interest in international trade costs and keen policy interest in efforts to mitigate them, so far there is very little hard evidence on the impacts of trade facilitation efforts. This paper exploits a dramatic reduction in the rate of physical inspections by Albanian customs to estimate the effects of fewer inspection-related delays on the level and composition of imports. In this setting, the paper finds evidence that the expected median number of days spent in Albanian customs falls by 7 percent when the probability that a shipment is inspected falls from 50 percent or more to under 50 percent. In turn, this reduction in time produces a 7 percent increase in import value. The paper finds evidence that the reforms favored imports from preferential trading partners, especially the European Union. There are also reform-induced changes in the composition of trade, including increases in average quantities and unit prices, the number of shipments, and the number of importing firms per product-country pair and the number of countries per firm-product pair. A back-of-the-envelope calculation suggests that the estimate of 7 percent import growth along an intensive margin is roughly consistent with a 0.36 percentage point reduction in average tariff equivalent trade costs. Applying this figure to the value of Albania's non-oil imports produces a reform-induced trade cost savings estimate of approximately US$12 million in 2012.

  • Tradepolicy, tradecosts, and developing country trade

    Author(s) : Bernard Hoekman, Alessandro Nicita Journal : World Development Volume 39, Issue 12, Pages 2069?2079, December 2011 Abstract : 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.

  • Credit constraints, heterogeneous firms, and international trade

    Author(s) : Manova, Kalina Journal : Review of Economic Studies, Volume 80, Issue 2, Pages 711-744, April 2013 Abstract : This paper examines the detrimental consequences of financial market imperfections for international trade. I develop a heterogeneous-firm model with countries at different levels of financial development and sectors of varying financial vulnerability. Applying this model to aggregate trade data, I study the mechanisms through which credit constraints operate. First, financial development increases countries' exports above and beyond its impact on overall production. Firm selection into exporting accounts for a third of the trade-specific effect, while two thirds are due to reductions in firm-level exports. Second, financially advanced economies export a wider range of products and their exports experience less product turnover. Finally, while all countries service large destinations, exporters with superior financial institutions have more trading partners and also enter smaller markets. All of these effects are magnified in financially vulnerable sectors. These results have important policy implications for less developed economies that rely on exports for economic growth but suffer from poor financial contractibility.

  • Trade liberalization and growth: new evidence

    Author(s) : Romain Wacziarg, Karen Horn Welch Journal : The World Bank Economic Review 22(2): 187-231 Abstract : This paper revisits the empirical evidence on the relationship between economic integration and economic growth. First, we present an updated dataset of openness indicators and trade liberalization dates for a wide cross-section of countries in the 1990s. Second, we extend the Sachs and Warner (1995) study of the relationship between trade openness and economic growth to the 1990s, discussing recent criticisms of their measurement and estimation framework. Our results suggest that the cross-sectional findings of Sachs and Warner are sensitive to the period under consideration. In particular, an updated version of their dichotomous trade policy openness indicator does not enter significantly in growth regressions for the 1990s. Third, and most importantly, we present new evidence on the time paths of economic growth, physical capital investment and openness around episodes of trade policy liberalization. In sharp contrast to our cross-sectional results, we find that liberalization has, on average, robust positive effects on growth, openness and investment rates within countries. We illustrate these large sample findings with detailed case studies in a subsample of representative countries.

  • The Philippines. In "Customs Modernization Initiatives: Case Studies"

    Author(s) : Parayno, Guillermo Journal : De Wulf, Luc, and José B. Sokol Abstract : In recent years, policymakers have become increasingly aware of the importance of policies that can facilitate the flow of goods and services across borders. Sound trade facilitation policies are indeed essential if countries are to realize the potential gains available from enhanced market access, lowered tariffs, reduced transportation costs, and improved communications. Such gains can allow countries to achieve higher growth rates and reduce poverty. Customs administrations are a critical component of this framework and are therefore important catalysts of economic development. Well-designed programs that focus on improving the efficiency of customs administrations can generate significant gains by helping to integrate developing countries into the global trading system. In this context, many countries have undertaken customs reform and modernization initiatives, often with the assistance of the World Bank or other development agencies

  • Does ‘Grease Money’ Speed Up the Wheels of Commerce?

    Author(s) : Kaufmann, Daniel and Wei, Shang-Jin Journal : IMF Working Paper 00/64 Abstract : In a general equilibrium in which bribe-extracting bureaucrats can endogenously choose regulatory burden and delay, the effective (not just nominal) red tape and bribery can be positively correlated across firms. Using data from three worldwide firm surveys, this paper finds evidence consistent with this hypothesis. Firms that pay more in bribes are also likely to spend more, not less, management time with bureaucrats in negotiating regulations. They also face a higher, not lower, cost of capital.

  • Corruption and Growth

    Author(s) : Mauro, Paolo Journal : The Quarterly Journal of Economics, (110)3: 681-712. Abstract : This paper analyzes a newly assembled data set consisting of subjective indices of corruption, the amount of red tape, the efficiency of the judicial system, and various categories of political stability for a cross section of countries. Corruption is found to lower investment, thereby lowering economic growth. The results are robust to controlling for endogeneity by using an index of ethnolinguistic fractionalization as an instrument.

  • Time as a Trade Barrier

    Author(s) : Hummels, David L., and Georg Schaur Journal : American Economic Association 103(7): 2935-59 Abstract : A large and growing share of international trade is carried on airplanes. Air cargo is many times more expensive than maritime transport but arrives in destination markets much faster. We model firms' choice between exporting goods using fast but expensive air cargo and slow but cheap ocean cargo. This choice depends on the price elasticity of demand and the value that consumers attach to fast delivery and is revealed in the relative market shares of firms who air and ocean ship. We use US imports data that provide rich variation in the premium paid for air shipping and in time lags for ocean transit to identify these parameters and extract consumer's valuation of time. By exploiting variation across US entry coasts we are able to control for selection and for unobserved shocks to product quality and variety that affect market shares. We estimate that each day in transit is equivalent to an ad-valorem tariff of 0.6 to 2.3 percent and that the most time-sensitive trade flows are those involving parts and components trade. These results suggest a link between sharp declines in the price of air shipping and rapid growth in trade as well as growth in world-wide fragmentation of production. Our estimates are also useful for assessing the economic impact of policies that raise or lower time to trade such as security screening of cargo, port infrastructure investment, or streamlined customs procedures.

  • Understanding the operations of freight forwarders : evidence from Serbia

    Author(s) : Mendoza Alcantara, Alejandra; Fernandes, Ana Margarida; Hillberry, Russell Henry; Journal : Policy Research working paper 7311, World Bank Abstract : Freight forwarders play a key role in moving goods across international borders. They arrange transport, oversee customs clearance on behalf of their clients, and more generally troubleshoot issues that arise while goods are in transit. This paper reports the results from a survey of 153 freight forwarding firms in Serbia. Respondents report on firm characteristics, operational choices, and conditions at the border posts and terminals where imported goods are cleared for release. One key purpose of the study is to investigate operational trade-offs between time and cost that arise when import shipments are in transit. In three of four hypotheticals, respondents suggest that money savings dominate time savings. Responses regarding real operational decisions such as route choices reinforce this finding. Respondents also reported penalty rates for late delivery of import shipments as well as the value of a typical import shipment. From these responses, it is estimated that the contracted value of one additional (unexpected) day of delivery time in Serbia appears to be approximately 1 percent of the value of the underlying shipment.

  • What constrains Africa's exports?

    Author(s) : Rocha, Nadia; Freund, Caroline Journal : Policy Research working paper 5184, World Bank Abstract : This paper examines the effects of transit, documentation, and ports and customs delays on Africa’s exports. The authors find that transit delays have the most economically and statically significant effect on exports. A one-day reduction in inland travel times leads to a 7 percent increase in exports. Put another way, a one-day reduction in inland travel times translates to a 1.5 percentage point decrease in all importing-country tariffs. By contrast, longer delays in the other areas have a far smaller impact on trade. The analysis controls for the possibility that greater trade leads to shorter delays in three ways. First, it examines the effect of trade times on exports of new products. Second, it evaluates the effect of delays in a transit country on the exports of landlocked countries. Third, it examines whether delays affect time-sensitive goods relatively more. The authors show that large transit delays are relatively more harmful because of high within-country variation.

  • Customs

    Author(s) : Volpe Martincus, Christian, Jerónimo Carballo, and Alejandro Graziano Journal : Journal of International Economics 96 (1): 119-37. Abstract : All international trade transactions are processed by custom agencies and such processing takes time. Despite the fact that time is a key trade barrier, the time it takes for shipments to clear customs and how customs' processing times affect firms' exports remain largely unknown. In this paper, we precisely estimate the effects of custom-related delays on firms' exports. In so doing, we use a unique dataset that consists of the universe of Uruguay's export transactions over the period 2002?2011 and includes precise information on the actual time it took for each of these transactions to go through customs. We account for potential endogeneity of these processing times by exploiting the conditional random allocation of shipments to different verification channels associated with the use of risk-based control procedures. Results suggest that delays have a significant negative impact on firms' exports along several dimensions. Effects are more pronounced on sales to newer buyers.

  • Labor market institutions, firm-specific skills, and trade patterns

    Author(s) : Tang, Heiwai Journal : Journal of International Economics, Volume 87, Issue 2, Pages 337-351, July 2012 Abstract : This paper studies how cross-country differences in labor market institutions shape the pattern of international trade, focusing on workers' skill acquisition. I develop a model in which workers undertake non-contractible activities to acquire firm-specific skills on the job. In the model, workers have more incentive to acquire firm-specific skills relative to general skills in a more protective labor market. When sectors are different in the dependence on these two types of skills, workers' skill acquisition turns labor laws into a source of comparative advantage. By embedding the model in an open-economy framework with heterogeneous firms, sectors with different levels of dependece on firm-specific skills, and countries with varying degrees of labor protection, I show that countries with more protective labor laws export relatively more in firm-specific, skill-intensive sectors through both the intensive and extensive margins of trade. I then estimate returns to firm tenure for different U.S. manufacturing sectors over the period of 1974-1993, and use the estimates as sector proxies for firm-specific skill intensity to test the theoretical predictions. By implementing the Helpman-Melitz-Rubeinstein (2008) framework to estimate sector-level gravity equations for 84 countries in 1995, I find supporting evidence for the predicted effects of labor market institutions on both margins of trade.

  • Exporting financial services in Latin America and the Caribbean

    Author(s) : Adrián F. González, Silvia Carolina López-Rocha, Tiffany (Rongpeng) Yang, Marilyne Youbi and Inés Zabalbeitia-Múgica Journal : Indicators Group Research Note Abstract : According to the World Trade Organization (WTO), trade in services has become the most dynamic segment of world trade, growing more quickly than trade in goods. While travel remains the most exported service both worldwide and in Latin America and the Caribbean (LAC), other services are becoming relevant for both developed and developing economies. Among them, financial services is one of the most important categories in terms of value. Worldwide, the value of financial services exports rose by 15.2% in real terms between 2008 and 2017. Nevertheless, this global trend of rising exports of financial services was not reflected in LAC, where they contracted by 24.4% between 2008 and 2016. In 2016 financial services accounted for just 2.2% of total services exports from the region, 91% of which was contributed by 10 countries. Exporting more financial services could benefit LAC economies by improving the allocation of capital through enhancing competition between banks and boosting economic growth. The Inter-American Development Bank has highlighted exports of financial services as a major opportunity to add value and diversify the region's exports. However, for economies to reap these benefits, adequate regulation needs to be put in place.

  • Connecting to Compete 2010: Trade Logistics in the Global Economy

    Author(s) : Arvis, Jean-Francois, Monica Alina Mustra, Mona Haddad, Bernard Hoekman, Lauri Ojala, Daniel Saslavsky and Ben Shepherd Journal : World Bank Policy Research Working Paper Abstract : This report presents the findings of the second edition of Connecting to Compete, a report on the new dataset for the 2010 Logistics Performance Index (LPI) and its component indicators. Based on a worldwide survey of global freight forwarders and express carriers, the LPI is a benchmarking tool developed by the World Bank that measures performance along the logistics supply chain within a country. The index can help countries identify challenges and opportunities and improve their logistics performance. The World Bank conducts the survey every two years. The 2010 LPI also provides a snapshot of selected performance indicators in nearly 130 countries, including expanded information on the time, cost, and reliability of import and export supply chains, infrastructure quality, performance of core services, and the friendliness of trade clearance procedures. The 2010 LPI and its indicators encapsulate the firsthand knowledge of movers of international trade, collected amid the economic turmoil of 2009. This information is relevant for policymakers and the private sector seeking to identify priorities for reform agendas. Findings include the following. First, except in high-income countries, the availability and quality of trade-related infrastructure is a major constraint to performance, but the specific priorities tend to vary across countries. Second, efficient border management and coordination of the various agencies involved in border clearance is increasingly important. Third, a major challenge for the international community is how to help the lowest performing countries benefit from an increasingly open global trading system

  • Trade, regulations, and income

    Author(s) : Caroline Freund and Bineswaree Bolaky Journal :  Journal of Development Economics, Volume 87, Issue 2, October 2008, Pages 309-321 Abstract : 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.

  • Transportation costs and international trade over time

    Author(s) : David Hummels Journal : Journal of Economic Perspectives, 21(3): 131-154, 2007 Abstract : 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.

  • Corruption and Bilateral Trade Flows: Extortion or Evasion?

    Author(s) : Dutt, Pushan, and Daniel Traca Journal : The Review of Economics and Statistics, 2010, vol. 92, issue 4, pages 843-860 Abstract : We analyze the impact of corruption on bilateral trade, highlighting its dual role in terms of extortion and evasion. Corruption taxes trade, when corrupt customs officials in the importing country extort bribes from exporters (extortion effect); however, with high tariffs, corruption may be trade enhancing when corrupt officials allow exporters to evade tariff barriers (evasion effect). We derive and estimate a corruption-augmented gravity model, where the effect of corruption on trade flows is ambiguous and contingent on tariffs. Empirically, corruption taxes trade in the majority of cases, but in high-tariff environments (covering 5% to 14% of the observations) their marginal effect is trade enhancing. (c) 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

  • The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders

    Author(s) : Thomas Holmes Journal : Journal of Political Economy 106 (4) Abstract : This paper provides new evidence that state policies play a role in the location of industry. The paper classifies a state as pro-business if it has a right to work law and anti-business if it does not. The paper finds that, on average, there is a large, abrupt increase in manufacturing activity when one crosses a state border from an anti-business state into a pro-business state.