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Customs

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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.

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... The importance of time in international trade is well documented in the literature (Hummels & Schaur, 2013;Martincus et al., 2015). However, with the rapid rise in global value chains (GVCs) and the sensitivity of fragmented production to delays, time is of the essence, probably more now than ever. ...
... For instance, Hummels and Schaur (2013) point out that a delay in transit by a day is equivalent to imposing an ad valorem tariff of 0.6%-2.3%. Similarly, Martincus et al. (2015) highlight an 11.4% fall in exports with an additional day spent in dealing with customs regulation. On the other hand, Limao and Venables (2001) highlight that a 10% reduction in transportation costs is associated with a 20% increase in trade volume. ...
... In a broad sense, trade facilitation considers the logistics and the environment concerning the movement of goods. As a result, the literature is filled with 'mono-dimensional models' 2 of trade facilitation with studies examining the role of the internet, time, corruption, efficient infrastructure, road quality and custom regimes on trade flows (Djankov et al., 2010;Feenstra & Ma, 2014;Gopalan et al., 2022;Hummels & Schaur, 2013;Martincus et al., 2015). Further, tradein intermediates are at the heart of the GVC setup. ...
Article
In this article, we examine the role of trade facilitation in fostering firm participation in global value chains (GVCs). We use cross-sectional data for 115 economies spanning 2006–2018 sourced from World Bank Enterprise Surveys. We employ four trade indicators which are as follows: customs, regulation quality, loans and digitalization proxying for trade facilitation measures and we correct for reverse causality using the instrumental variable approach. Our empirical findings highlight that customs requirements deter GVC participation of the firm. Further, adhering to government regulations, having access to loans and digital communication adoption fosters supply chain integration of the firm. The present study also finds favourable heterogenous effects of trade facilitation on GVC participation of less productive firms and larger firms. Our findings are robust to alternative methods of endogeneity correction and GVC definitions. JEL Codes: F1, F19, F14
... Work [5] evaluates the impact of temporary delays associated with customs clearance when exporting goods to enterprises. Research results showed that temporary delays have a significant negative impact on the export of goods in various directions. ...
... It was possible to implement the simulation model in the GPSS World simulation automation package, which, unlike [2][3][4][5], makes it possible to study the process of export operations according to various types of supply chains. The simulation model provides for determining the duration and reliability of a foreign trade operation depending on the chosen form of interaction with intermediary organizations and the type of supply chain. ...
Article
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The object of this study is the process of goods delivery in international road transport using various types of logistics chains. The problem being solved is due to the need to develop recommendations for exporters of goods to reformat or design new supply chains during wartime. The expediency of organizing foreign trade operations by the cargo owners' own forces or with the involvement of enterprises providing logistics consulting services is considered. A simulation model of goods delivery in international road traffic was built and implemented in the GPSS World simulation automation package. The model involves the optimization of organizational and technological processes related to the activity of both a separate link and the entire supply chain. The study takes into account the components of the time characteristics of the performance of preparatory work when establishing cooperation with institutions and organizations, as well as the direct service of the exporter. The application of the developed model in practical activities will provide an opportunity for exporters to obtain information about the duration and reliability of the stages of a foreign trade operation and the feasibility of involving consulting enterprises in cooperation. At the same time, the simulation results reflect the performance indicators of the proposed supply chains when delivering goods by road transport along various routes. The proposed simulation model will make it possible to reduce the time spent searching for links in the formation of a supply chain by 8–12 %, and the duration of a foreign trade operation by 10–14 %. Thus, the reliability of cooperation with intermediary organizations will increase by 8–11 %
... In addition, their analysis also proves that information availability has one of the strongest impacts on exports of middle and low-income countries. Further empirical evidence showing that measures aimed at simplifying border procedures have positive effects on trade flows through a decrease in trade costs includes the studies by Fernandes et al. (2015) and Fernandes et al. (2016), Volpe Martincus et al. (2015 and Persson (2013). Fernandes et al. (2015) investigate the manifold impacts of the reduction of annual physical inspection rates on imports in Albania. ...
... The only statistically significant gain of the in-house clearing program is the reduced variability of clearance times, with a lack of visible benefits in terms of clearance times, inspection rates, and total imports. Volpe Martincus et al. (2015) estimate the effects of custom-related delays on firms' exports in Uruguay and their results suggest that delays have a significant negative impact on firms' exports, especially to newer buyers. The paper by Persson (2013) tests whether trade facilitation affects the extensive margin by counting the number of exported products from developing countries to EU countries. ...
Conference Paper
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The European financial and economic crisis interrupted the boost of trade within CEFTA-2006, and diverted trade flows from within the region toward the EU market. Currently, Western Balkan economies record a high level of economic integration with the EU which accounts for almost 2/3 of their total trade exchange of goods, while the trade exchange within CEFTA -2006 falls between 10-15% of the total trade exchange of goods of its member states. Changes in the legal texts of CEFTA-2006 initiated by the so-called Berlin Process, and the effort for deepening regional integration according to the latest Action Plan (2020) envisaged the creation of a Common Regional Market based on EU rules by 2024. The impact of the creation of a Common Regional Market within CEFTA2006 upon the economic welfare of each of the member-states is still unclear. Thus, all estimations provided vague, ambiguous, and unclear results and recommendations which did not help overcome the already present reluctant attitude. The latest 2021 Open Balkan Initiative in which participate only Albania, Macedonia and Serbia brought even more confusion and resentment by the other four CEFTA-2006 member-states. The aim of this paper is to elaborate the possibilities that might be open by the latest regional integration initiatives in regard of boosting regional trade exchange of goods. In the last two decades, it was recognized that enhanced trade liberalization might be achieved by undertaking trade facilitation measures. The effects of the implementation of these measures are expected to be of greater significance for increasing regional trade exchange in comparison to the elimination of all other trade barriers, including tariffs. Previous research in this field confirmed that the elimination of certain customs and administrative barriers within the Western Balkan region had a significant positive impact on trade. We apply the gravity model of international trade to estimate the impact of OECD Trade Facilitation Indicators on trade among CEFTA-2006 members: Albania, Bosnia and Hercegovina, Montenegro, Moldova, Macedonia, and Serbia. These indicators cover a great spectrum of border procedures for more than 160 economies across different income levels, geographical regions, and levels of development. Each Trade Facilitation Indicator is composed of several specific, precise, and fact-based variables related to existing trade-related policies and regulations and their implementation in practice. The analysis will be based upon eleven Trade Facilitation Indicators, separately evaluated by the individual relevance of each of them for the regional trade exchange.
... There are several studies investigating the influence of cargo transport procedures on trade. Martincus et al. found that there was a significant negative effect from customsrelated delays on firms' exports, such as a reduced number of shipments and buyers and reduced exports per buyer, in terms of both volume and value [3]. Djankov et al. found that each additional day a cargo was delayed from being shipped reduced trade by more than 1%, using gravity equation modeling with data from 98 countries on the timing of moving containerized products between the factory gate and ship [4]. ...
... The major mode of transport cargo from and to each country's trading partners was identified by comparing the volume of seaborne and overland cargo, based on trading with each country's partner in 2019, following the definition of Doing Business reports [21]. [3][4][5]. The numbers of documents to export and import were also used to make aggregate trade facilitation indicators of border and transport efficiency by Portugal-Perez and Wilson [6]. ...
Article
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In many countries, document and border procedures create trading barriers, thereby impairing economic growth. These can range from insufficient transshipment facilities to unsupportive institutional arrangements. To address this, countries have taken reforms to improve their procedures by introducing electronic documentation systems, strengthening border infrastructure, and enhancing customs procedures. However, the efficiency of the document and border procedures in each country remains unclear, as well as how new reforms can affect these. This study investigated the efficiency of document and border procedures in each country, defined as the trade volume and value per required cost, time, and documents in the trading procedures. The efficiencies were calculated through a data envelopment analysis with cross-sectional data from 2019 and a window analysis with panel data from 2014 to 2019. The study found a positive change in export procedure efficiency after all three types of reforms were instituted in a country, but a positive change in import efficiency only after the introduction of electronic documentation. All countries were classified according to their document and border procedure strengths and weaknesses.
... The data that support the findings of this study are openly available in the Monash Figshare data repository at https://doi.org /10.26180/5e3290da4fc61. history of data availability on export delays has encouraged their study independently of costs (e.g., Hummels 2007;Schaur 2010 2 , 2013;Martincus et al. 2015;Djankov, Freund, and Pham 2010). As a result, while much has been written about the extent to which delays can impede the flow of trade, little is known about export costs. ...
... For the most part, research on export delays has so far adopted either a cross-country approach (e.g., Djankov, Freund, and Pham 2010) or a single country time-series perspective (e.g., Martincus et al. 2015, Fernandes et al. 2015. Both of these strands of the literature find that time delays are a significant barrier to trade. ...
Article
With the virtual disappearance of tariffs, domestic export time delays have emerged as what is arguably the next most significant obstacle to trade. This may explain recent initiatives to combat delays independently of other trade transaction costs by a variety of regional and international organizations including the WTO. Such initiatives have resulted in important reductions in export time delays in forty percent of developing countries. In this paper, we propose a novel mechanism by which reductions in delays induce governments to respond by increasing the export fees that they charge exporters. We test this prediction empirically and use a difference gravity approach to investigate the joint impact of both delays and export fees on the flow of trade. Our results support the hypothesis of endogenous export fees which suggests that policies targeting delays in isolation are, at least ex ante, suboptimal. Our findings further show that for exporters of low‐value and time‐insensitive goods, such as many developing countries, export fees are at least as significant an impediment to exports as delays.
... Asimismo, se han abordado temas relacionados con las técnicas más comunes utilizadas para medir la eficiencia aduanera, como lo han hecho Zamora-Torres y Navarro-Chávez (2014; 2015), Notteboom et al. (2000), Ennen y Batool (2018), entre otros investigadores. Asimismo, se han presentado otros trabajos que se centran en la medición del desempeño del sector público (Lovell, 1993), el análisis de las aduanas (Volpe et al., 2015) y la evaluación de la competitividad de las mismas (Zamora-Torres y Navarro-Chávez, 2015). ...
Article
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El comercio internacional es cada vez más importante en el mundo de los negocios, por lo tanto, la gestión de cada una de las etapas del proceso para comercializar los bienes a nivel internacional es clave. Dentro de dichas etapas, un momento crucial es el paso de las mercancías por las aduanas, por lo que las oficinas de aduanas juegan un papel fundamental en el tema de la facilitación del comercio, ya que a través de ellas se lleva a cabo el intercambio comercial entre países. El presente artículo tiene como objetivo determinar la eficiencia de las aduanas de las principales economías en la región Asia-Pacífico, a través de un modelo haciendo uso de la metodología DEA con metafrontera, agrupando a las aduanas de las economías consideradas como desarrolladas y economías consideradas como menos avanzadas en esta región. Los resultados muestran que Australia, Canadá, Nueva Zelanda y Singapur son las economías que lideran la eficiencia, de conformidad con los resultados de esta investigación. Códigos JEL: H0, H3, H8, F0, F2, F5 Recibido: 08/10/2023. Aceptado: 05/09/2024. Publicado: 25/10/2024.
... According to the literature, several factors are considered when classifying shipments into different lanes (Martincus et al., 2015;Ritzen-Pennings, 2020;Tanaka, 2011). In some cases, countries use risk management matrices to define the lane. ...
Article
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The role of tariff dispersion, defined here as having different tariff lines or import tariffs for ‘similar products’, has been underexplored. In this paper, we present empirical evidence on the role that tariff dispersion has on red lane classification during customs clearance in Argentina. We find that products with tariff dispersion are more likely to be classified through the red lanes. In particular, high levels of tariff dispersion at the Harmonized System (HS) level 6 are associated with a 10 per cent increase in the probability of being classified in the red lane. Considering the negative effects of delays in customs on competitiveness, this paper highlights the relevance of having a simple — and not necessarily uniform — import tariff structure.
... This was done to improve the effectiveness and efficiency of those procedures as well as the level of transparency within the department. According to Martincus et al. (2015), any business or organization that wants to retain its current level of success and continue to make progress must make it a priority to stay up with the most recent technological breakthroughs and integrate those innovations into all of its processes and operations. This is the only way for the company or organization to continue to make progress and maintain its current level of success. ...
Article
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The purpose of the study is to examine the effect of customs electronic business (CEB) on knowledge management (KM) and organizational performance (OP) in the Jordanian Customs Department (JCD), as well as to examine the effect of KM on OP. It also seeks to determine whether KM mediates the relationship between CEB and OP. A survey was conducted on 250 persons from the JCD. However, 230 questionnaires were retrieved, and 204 questionnaires were valid for statistical analysis. The partial least squares structural equation modelling (PLS-SEM) is used to evaluate and test the study model. According to the findings of this study, it is evident that CEB has a positive significant effect on OP and KM. The findings also showed that KM in the JCD mediates the association between CEB and OP.
... Egypt and Tunisia also observe substantial GDP gains when assuming a mar- 35 In line with previous studies, customs delays have been shown to be a significant barrier to trade. For example, Volpe Martincus, Carballo & Graziano (2015) find that if all exports in Uruguay had been subject to physical inspection, and if such inspections had lasted two days, then total exports in 2011 would have been 16.4 percent lower than they actually were. Using transaction-level data from El Salvador, Carballo, Graziano, Schaur & Martincus (2022) show that upgrading transit systems to streamline border processing in developing countries can be a high-return investment (with a back-of-the-envelope estimated return of US$3 to 1). ...
... Delays by a few days can be disruptive for supply chains, in terms of both costs and lost sales (Egan and Mody, 1992). Analyzing Uruguay export transaction data from 2002 to 2011, Volpe Martincus et al. (2015 pointed out that customs-related delays have a significant negative impact on firms' exports along several dimensions. ...
... The In the EODB i nter variable, the indicator T RA is statistically positive at the 1% level. This is consistent with Martincus et al. [43], which stated that a 10% increase in customs delays results in a 4% decline in exports due to the higher costs for exporters. ...
Article
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Based on both yearly data of 130 economies, this paper studies the association between the ease of doing business and FDI from three characteristics, i.e., internationalization, legalization, and facilitation. The results demonstrate that the ease of doing business and its three characteristics, i.e., internationalization, legalization, and facilitation all have a statistical positive influence in attracting FDI inflows. Second, this paper finds that in the legalization of doing business, the resolving insolvency indicator is the most statistically positive on attracting FDI, and in the facilitation of doing business, the paying taxes indicator plays an essential role in attracting FDI. Third, this paper finds that the ease of doing business has a vital impact on FDI inflows in developing countries, but not significant for developed countries. The implications of this paper are helpful for local governments optimizing their business environment to attract FDI.
... This can also be the result of increased trust by consumers, due to the improved image of the company and the increased demand for the certified product. Eventually, trust may also lead to facilitated custom control regime and a reduction in the associated trade costs (Latouche and Chevassus-Lozza 2015;Volpe Martincus et al 2015). ...
Article
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This paper estimates the relation between technical regulations and firms’ export dynamics using country-sector indicators from two firm-level datasets—the novel UN ITC NTM Business Surveys and the World Bank Exporter Dynamics Database—for 18 developing countries over the 2010–2014 period. The results from the analysis indicate that export markets where exporters perceive technical regulations as more burdensome are characterized by a lower number of exporters, a lower value of exports, and a higher concentration rate. These results are in line with the prediction of the heterogeneous firms’ trade theory (Melitz, 2003): additional trade costs are expected to push some firms out of exporting, therefore reducing the total number of exporters and increasing concentration. Also, technical regulations hit small firms’ exports twice as hard as they hit large firms, confirming that smaller firms react more strongly to changes in trade costs.
... The development of an innovation platform provides for the following initiatives: monitoring of major technological innovations in the world, including the use of 4D and 5D printers; creation of a single IT system, including the connection of information systems of other countries, which will ensure rapid exchange of information, the ability to obtain preliminary information, identify the recipient of the goods, determine the degree of risk of the transaction, before the goods arrive at the checkpoint; use of modern methods of data processing in work with large arrays of information; creation and introduction of technical means of customs control, development of information system of international trade; use of the latest intelligent programs in the work of customs, for example, in the customs practice of other countries artificial intelligence algorithm is successfully used to determine risks (Okazaki 2018); introduction of innovative technologies for customs control, customs clearance (for example, the useful experience of customs procedures at Dubai Airport (UAE) using biometric technologies (Martincus et al. 2015). ...
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The influence of globalization processes, the customs space of the country, requires the development and implementation of a transparent state customs policy to ensure security and integration into the space of the higher hierarchical order. The purpose of the study is to form scientific-applied recommendations regarding the development vectors of the customs space of a country in the global environment to improve its risk management system. The main method of study is econometric modeling, namely, canonical analysis in determining the interdependence of sustainable development and customs space. The purpose of the study is to suggest directions for development vectors for a country’s customs space that will mitigate various risks. Originally, 174 countries were selected for analysis, but the final sample was formed by 98 countries. According to the results of econometric modeling, it was determined that the following variables have the greatest impact on the customs space: human development index; GDP per capita; corruption perception index; global enabling trade index; environmental performance index; social progress index; global competitiveness index. The findings can be used by public authorities in developing a strategy for reforming the customs system of developing countries, taking into account the risks and challenges of the global environment.
... The time elapsed between the official registration of the clearance documents until the final approval to release goods is referred to as clearance time. Clearance time is a commonly recognized performance index [32]. Maintaining the balance between preserving the governance of procedures and reducing the clearance time is a foremost challenge for the Nafeza. ...
Article
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The relationship between big data analytics (BDA) and smart cities (SCs) has been addressed in several articles. However, few articles have investigated the influence of exploiting BDA in data-driven decision-making from an empirical perspective in a case study context. Accordingly, we aim to tackle this scarcity of case-study research addressing the interrelationships between SCs, BDA, and decision-making. Filling this gap will shed light on the challenges and design principles that should be considered in designing a BDA artifact in the domain of smart cities. We analyze a case study of a digital transformation project in Egypt. Results show a tangible positive effect of utilizing data analytics in support of the decision-making process.
... Many studies show that trade facilitation reduces trade costs (World Bank, 2009;Hillberry & Zhang, 2015;Nizeyimana & De Wulf, 2016;Go, 2018), and increases trade flows (Iwanow & Kirkpatrick, 2009;Sá Porto, Canuto & Morini, 2015), which is particularly significant for developing countries (Moïsé & Sorescu, 2013). Trade facilitation has a positive influence on time-sensitive goods, such as agricultural products and value-added chains (Martinez-Zarzoso & Márquez-Ramos, 2008;Djankov, Freund & Pham, 2010;Shepherd, 2013;Hoekman & Shepherd, 2015;Volpe, Carballo & Graziano, 2015). Trade facilitation helps to increase the diversification of developing countries' import and export markets (Shepherd, 2010;Dennis & Shepherd, 2011;Persson, 2013), especially for small and medium-sized enterprises (Fontagné, Mitaritonna & Signoret, 2016;Go, 2018). ...
Article
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The Association of Southeast Asian Nations (ASEAN) considers trade facilitation as a driving force in forming a single market and a single production base. This paper constructs an ASEAN scorecard for measuring the performance of trade facilitation strategic plans by ASEAN member states. Next, a structural gravity model is used in the paper in order to estimate the trade facilitation performance influence on ASEAN trade flows. The fact that the indicator of easing Nontariff Barriers (NTBs) and institutional coordination, on the one hand, and the ASEAN member states' engagement indicator, on the other, had the highest enforcement scores in ASEAN in the period 2017-2019. Those two indicators also exert the biggest influence on ASEAN trade flows, especially ASEAN extra-regional trade.
... The work [1] estimates the impact of time delays associated with customs clearance when exporting goods to enterprises. Research results have shown that time delays have a significant negative impact on the export of goods in various directions. ...
Article
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The main link in the logistics supply chain is the cargo customs complex. It provides customs and logistics services to cargo owners during the export and import of goods, complex services, placement of goods in a customs warehouse and a temporary storage warehouse. To substantiate the choice of the optimal logistics supply chain and optimize the work of the cargo customs complex, it is proposed to use simulation modeling. The model of operation of the logistics chain and the cargo customs complex is presented in a general form. The proposed model is implemented in the GPSS World simulation automation package. Testing the simulation model involved checking its adequacy. Checking the adequacy of the simulation model, which showed the maximum value of the t-statistic of 1.424 with a critical value of 1.85, proved its compliance with the work of a real object. After completing the adequacy check, the simulation error was estimated, which was 3 % with an allowable 5 %, due to the presence of pseudo-random number generators in the simulation model. Thus, the simulation error is insignificant for this study. For the cargo customs complex, an example of the simulation results is given. Based on the results of simulation modeling, it is possible to determine: the optimal type of the logistics supply chain and the optimal structure of the cargo customs complex. A wide range of tasks that the proposed simulation model can solve is presented. Thus, the developed simulation model will make it possible to analyze and improve the modes of operation of the cargo customs complex. In addition, it will allow to get an informed decision regarding the use of a certain type of logistics supply chain
... The seminal work by Hummels and Schaur (2013) found that long transit delays were negatively associated with a country's probability to export, and this was especially the case for time-sensitive goods such as parts and components. Using different datasets and identification strategies, several other papers examined the role of time lags on bilateral trade (Djankov et al., 2006(Djankov et al., , 2010Freund & Rocha, 2011;Martincus et al., 2015;Martinez-Zarzoso & Márquez-Ramos, 2008). In addition, face-to-face meetings play an important role in building business relationships or buyerseller linkages (Bernard et al., 2019;Storper & Venables, 2004), search and contracting (Startz, 2016), trade (Cristea, 2011), as well as foreign direct investment (Campante & Yanagizawa-Drott, 2018;Fageda, 2017). ...
Article
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This paper examines the impact of Covid-19 lockdowns on exports by Chinese cities. We use city-level export data at a monthly frequency from January 2018 through April 2020. Differences-in-differences estimates suggest cities in lockdown experienced a ceteris paribus 34 percentage points reduction in the year-on-year growth rate of exports. The lockdown impacted the intensive and extensive margin, with higher exit and lower new entry into foreign markets. The drop in exports was smaller in i) coastal cities; ii) cities with better-developed ICT infrastructure, and iii) cities with a larger share of potential teleworkers. Time-sensitive and differentiated goods experienced a more pronounced decline in export growth. Global supply chain characteristics matter, with more upstream products and industries that had accumulated larger inventories experiencing a smaller decline in export growth. Also, products that relied more on imported (domestic) intermediates experienced a sharper (flatter) slowdown in export growth. The rapid recovery in cities' exports after lockdowns were lifted suggests the policy was cost-effective in terms of its effects on trade. This article is protected by copyright. All rights reserved.
... Accordingly, the literature has also been specifically interested in the influence that time to clear customs has on export performance. Volpe Martincus et al. (2015), provide evidence on how customs processing times affect firms' export performance in Uruguay over the period 2002-2011. They find that customs-driven delays have a significant negative effect on firms' exports: a 10% increase in customs delays was found to be associated with a 3.8% decline in exports. ...
Article
This paper examines the impact of regulation-driven trade barriers on export entrepreneurship in a panel of 60 countries between 2006 and 2014. The paper finds robust evidence that unfavorable trade regulations significantly reduce export entry rate and export entry density (two critical measures of export entrepreneurship) by increasing the time and cost associated with documentary and customs compliance procedures. These findings support the hypothesis that less conducive business regulations are an important domestic supply constraint which impede export entrepreneurship by increasing trade costs. In addition, the paper finds that the magnitude of the negative relationship between export entrepreneurship and regulation-driven trade barriers is significantly more pronounced in countries with poor governance quality. Two measures of governance quality (i.e., political stability and rule of law) are shown to be relatively more significant in aiding favorable trade regulations that promote export entrepreneurship. Furthermore, a reduction in regulation-driven trade barriers has a positive impact on net entry rate and survival rates of first, second- and third-year exporters, and high-quality governance institutions significantly increase the magnitude of this positive relationship.
... Freund and Rocha (2011) convey a similar message in the case of African countries and find inland transit delays to matter more than those related to documentation processing and Customs clearance. Likewise, Volpe Martincus, Carballo, and Graziano (2015) show that a 10 percent increase in Customs-driven delays in the time to export leads to a 3.8 percent decline in firms' exports in Uruguay, with additional negative consequences for export market diversification. Most of these studies concur to say that the negative effects of delays on trade are particularly exacerbated for time-sensitive goods such as perishable agricultural products or parts and components (Hummels and Schaur, 2013). ...
... Anders and Caswell (2009) show a different impact on trade of Hazard Analysis and Critical Control Points (HACCP) requirements for seafood products in the USA between developed and developing countries. Volpe et al. (2015) assess the impact of customs processing times on the trade at the firm level. Their findings reveal that pre-shipment inspections to customs create delays, which have a significant negative impact on the firms' exports. ...
Article
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Nowadays, trade negotiations afford both liberalism- and protectionism-oriented policies. Indeed, in recent decades, the developed countries have been actively engaged in negotiating many preferential agreements to integrate developing countries (DCs) into world trade and encourage their economic growth, but many of these schemes contrast with the complex rules, often imposed on international markets, that still are an obstacle for exporters. Their presence and related costs reduce the importance of preferential trade agreements (PTAs) in increasing trade flows. This article attempts to assess the impact of preferential trade policies on trade flows controlling for different non-tariff barriers (NTBs), using a structural gravity model. The analysis uses disaggregated data, registered in the year 2017, on EU imports (defined at level HS-6 digit) from a large number of exporters (187 developed and developing countries) and also includes the intra-EU trade. Our results show robust and positive estimates for the impact of preferences on bilateral trade flows, however, higher non-tariff barriers are likely to play a role in reducing both the extensive margins of trade, and so tariff preferences alone are not sufficient to access international markets. The impact of NTBs on the intensive margin of trade is ambiguous; some measures may act as catalysts and therefore increase trade, and others may act as an additional cost of trade and thus hinder trade.
... This aspect is particularly important in international trade and typically involves the adoption of standards. Adopting standards may increase sales on foreign markets, improve the image of a company, or even decrease associate trade costs due to facilitated custom control regime (Cranfield, Henson, & Masakure, 2011;Latouche & Chevassus-Lozza, 2015;Carballo, Graziano, & Volpe Martincus, 2015;Goedhuys & Sleuwaegen, 2013). Proving that standards are met, typically involves going through a certification process. ...
Article
Defining and measuring competitiveness remains a subject of interest as well as debate: policy makers need to understand how competitive their country is relative to others, and how their competitive position evolves overtime (Fagerberg & Srholec, 2017). As such, well-known indicators of country performance have been developed over the years. While the business and economic literature recognise that “It is the firms, not nations, which compete in international markets” (Porter, 1998), the existing indices do not asses the capabilities of businesses. This paper fills this gap by proposing a multidimensional framework of firm competitiveness. Through factor analysis, we test the framework using firm level data from the World Bank Enterprise Surveys on over 100 countries. Regression based sensitivity checks confirm that the firm level index built in this paper positively correlates with commonly used proxies of firm competitiveness (i.e. labour productivity, the probability to export, etc.). The framework is applicable to firms of different size and export status.
... However, today, the effectiveness of the supply chains is significantly influenced by customs authorities, whose activities are associated with significant loss of time during customs clearance and ‹ 98 › crossing the state border (Volpe Martincus et al., 2015). Hence, from a commercial point of view, any delays automatically turn into a cash equivalent (Krikavsky, 2004;Elliott & Bonsignori, 2019;Biljan & Trajkov, 2012). ...
Article
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Creating supply chain involving the customs infrastructure facilities is an urgent topic when shipping cargo internationally. The most in demand are cargo customs complexes, which have in their structure customs storerooms, warehouses of temporary storage, perform freight-forwarding, and customs-brokerage and other functions that are necessary to perform foreign economic activity. Also there are subdivisions of customs authorities on their territory. This type of business activity provides the business entities with the comprehensive service and enables them to reduce the time spent moving to each of the necessary control services or logistics facilities when moving cargoes in different customs regimes. Therefore, it is proposed to apply the concept of logistics chain reliability with a freight customs complex as its element. The latter will take into account business entities` financial and time expenditures with non-productive timing at the different transition stages of material flow, and will enable to optimize information flows. The paper considers the procedure of placing imported goods in a temporary storage warehouse. It is proposed the regulation methodology for individual service stages provided by a freight customs complex. The generalized algorithm for constructing a reliability model of a freight customs complex`s operation is offered allowing to determine the reliability level of each individual element in a logistics chain.
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This study aims to develop the Global Resilience In Transport-and-Logistics (GRIT) framework designed to reinforce the resilience of global supply chains against a variety of disruptions, from pandemics to geopolitical tensions and environmental challenges. It facilitates devising robust, adaptable logistics and transportation strategies that help mitigate the challenges of supply chain disruptions. The research adopts a mixed-methods approach, combining a literature review with the conceptual foundation of the Stress and Strain model and the Theory of Graceful Extensibility. It adapts these concepts to the global transportation and logistics sector to develop the GRIT framework. The findings reveal the GRIT’s potential in identifying critical areas for strategic intervention and thus enabling logistics managers to adeptly navigate disruptions. Through its application in a real-world scenario, the framework demonstrates its applicability and effectiveness in mitigating the impact of supply chain disruptions.
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I use an approach from the family of “new quantitative trade models” to explore the links between trade costs and integration in Global Value Chains (GVCs). The model conceptualizes GVC trade through a multi‐country, multi‐sector Ricardian model that nests the standard structural gravity model. It provides a general framework in which to assess the impacts of changes in iceberg trade costs on GVC trade, understood as the sum of backward linkages and pure double counting, in line with recent work on trade in value added. As an example, I use the model to show that observed changes in trade facilitation performance between 2015 and 2019 have strong explanatory power for observed changes in GVC trade during the same period: the model accounts for over one‐third of the observed change, albeit with substantial variation across countries and sectors.
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Corruption has become a big issue in the international trade environment with the increasing number of non-tariff barriers. The cost of corruption in customs administrations around the world has been estimated to be at least USD 2 billion. When stringent regulations become barriers to firms, they sometimes bribe government officials to get things done. Using firm-level data covering 11 Asian countries, this study sets out to quantify the impact of customs and other trade regulatory barriers on the firms’ decision to bribe. Endogenous treatment model has been accommodated to address possible endogeneity problems usually inherited in this kind of observational data. Results provide that in Asia, firms which experience difficulties with customs and other trade regulatory constraints are likely to pay more bribe amounting to 6.4% of their annual total sales than other firms. Enterprises which trust the fair functioning of their judiciary systems and enterprises with high productivity levels are less likely to bribe government officials to get things done. It is, therefore, necessary to implement policies to eliminate administrative inefficiencies especially in customs and minimize trade regulatory constraints to control trade-related corrupt practices.
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In this paper, we revisit the evidence on the effects of time spent on border‐crossing procedures for international trade using a theory‐consistent structural gravity model. We exploit a rich panel dataset including domestic trade flows and employ a recent econometric estimator that exhibits favorable asymptotic properties for inference. The results indicate a significant negative effect of the time required for border procedures that is driven by the time needed for document preparation. We find that an additional day spent on those procedures corresponds to an ad valorem tariff equivalent of 0.4 percentage points. The parameters of our structural model are used to simulate three counterfactual scenarios, quantifying the effect of past and potential future trade facilitation efforts for middle‐, low‐, and high‐income countries. Full endowment general equilibrium effects suggest that in times of stagnating multilateral and bilateral trade liberalization efforts, unilateral implementation of trade facilitation carries the potential to induce an alternative stimulus for trade and welfare, especially for low‐ and middle‐income countries.
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This study reviews the logistical infrastructure of the automotive industry of Germany and Poland; to be specific, the factories in Poland which are run by German automobile companies are studied, in order to assess the benefit in the movement of factories from Germany to Poland. Quantitative data of Poland’s logistical structure, German and Polish economies, production output figures and values, etc. are studied under scholarly literature for qualitative assessments. Critical analysis has been made with comparison to each other and Czech Republic as well which is a neighbor and strong competitor of Poland in the industry. Furthermore, data is restructured to assess the economic benefits of German companies and the effect on Polish economy to ascertain the feasibility to produce in a neighboring country in order to save on wages and continue to pay for transportation, rather than producing in the home country of the companies. Findings are drawn in conclusion and a tentative benefit of savings has been noted. Manufacturing volume, vehicular exports, automotive parts exports as well as railway density, carriage of goods and road transport has been analyzed during the process.
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Limiting intrusive customs inspections is recommended under the revised Kyoto Convention, and is also a proposal discussed as part of World Trade Organization (WTO) trade facilitation negotiations. To limit such inspection, the more modern administrations intervene at all stages of the customs chain using electronic data exchange and risk analysis and focusing their resources on a posteriori controls. Customs administrations of developing countries are slow to move in that direction. Risk analysis would therefore seem to be a priority for modernising the customs systems in developing countries. The most effective risk management system uses statistical scoring techniques. Several simple statistical techniques are tested in this article. They all show a good capability to predict and detect declarations that contain infractions. They can easily be implemented in developing countries' customs administrations and replace the rather inefficient methods of selectivity that result in high rates of control and very low rates of recorded infractions.
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This article uses data on 11 industries in 85 developing countries to show that trade times matter for import and export performance at the firm level. Firms import more intermediate inputs if import licensing times are shorter. They export more of their production if border clearance times are shorter, but tend to use third-party distributors more if clearance times are longer. This is the first time that imports and indirect exports have been considered in the firm-level literature on trade facilitation.
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Extensive research has demonstrated the existence of large potential welfare gains from trade facilitation—measures to reduce the overall costs of the international movement of goods. From an equity perspective an important question is how those benefits are distributed across and within nations. After discussing the possible impacts of trade facilitation, we use firm-level data for a wide variety of developing countries to investigate whether it is mostly large firms that benefit from trade facilitation. We find that firms of all sizes export more in response to improved trade facilitation. Our results suggest that trade facilitation can be beneficial in a range of countries, including those that are primarily involved in value chains as suppliers.
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We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in non-crisis years.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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This article builds on and extends the quantitative part of OECD Trade Policy Working Paper No 35 co-authored by Enrico Pinali and Massimo Geloso-Grosso. The Working Paper includes detailed case studies as well as a discussion of specific GATS issues related to the logistics services sector. The author would like to thank Dale Andrew, Henk Kox and Delegates to the Working Party of the Trade Committee for useful comments on the Working Paper and Paul Swaim and Mark Pearson for useful comments and suggestions on this version. The usual disclaimer applies.
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Newly developed historical time series on public debt, along with data on external debts, allow a deeper analysis of the debt cycles underlying serial debt and banking crises. We test three related hypotheses at both “world” aggregate levels and on an individual country basis. First, external debt surges are an antecedent to banking crises. Second, banking crises (domestic and those in financial centers) often precede or accompany sovereign debt crises; we find they help predict them. Third, public borrowing surges ahead of external sovereign default, as governments have “hidden domestic debts” that exceed the better documented levels of external debt. (JEL E44, F34, F44, G01, H63, N20)
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The authors determine how time delays affect international trade using newly collected World Bank data on the days it takes to move standard cargo from the factory gate to the ship in 126 countries. They estimate a modified gravity equation, controlling for endogeneity and remoteness. On average, each additional day that a product is delayed prior to being shipped reduces trade by at least 1 percent. Put differently, each day is equivalent to a country distancing itself from its trade partners by 70 kilometers on average. Delays have an even greater impact on developing country exports and exports of time-sensitive goods, such as perishable agricultural products. In particular, a day's delay reduces a country's relative exports of time-sensitive to time-insensitive agricultural goods by 6 percent.
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We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales toward its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within-firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.
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Using detailed U.S. and Spanish export data, we document that trade costs of a per-shipment nature are associated with less frequent and larger shipments (i.e., more lumpiness) in international trade. This finding is pervasive across broad product categories, but most apparent for industrial supplies, parts and accessories, and food products. © 2015 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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This paper studies how exporting firms optimize their inventory management in order to adapt to the uncertainty stemming from demand volatility. We motivate our analysis with a stochastic inventory management framework. We use monthly micro data on French exporters and find that greater uncertainty is associated with lower sales volume. We decompose this e↵ect to its two margins, the number of shipments and average shipment size to find that the number of shipments decreases more quickly as uncertainty increases which is in line with firms adjusting their inventory policy as well as their exported volume as a result of increased uncertainty. Also, uncertainty was found to matter more at distant markets where the uncertainty between firm actions and the arrival of the products is the largest.
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A large and growing share of world trade travels by air. We model exporters' choice between fast, expensive air cargo and slow, cheap ocean cargo, which depends on the price elasticity of demand and the value that consumers attach to fast delivery. We use US imports data that provide rich variation in the premium paid for air shipping and in time lags for ocean transit to extract consumers' valuation of time. We estimate that each day in transit is equivalent to an advalorem tariff of 0.6 to 2.1 percent. The most time-sensitive trade flows involve parts and components trade.
Article
Our knowledge of the trade effects of domestic infrastructure is very limited. The reason is twofold. First, data needed to examine these effects are not readily available. Second, identifying such effects requires properly addressing potential endogeneity problems affecting the relationship between internal infrastructure and trade. In this paper, we overcome these limitations by combining firm-level export data with detailed geo-referenced information on Chile and by exploiting the earthquake that took place in this country in 2010 as an exogenous source of variation in available infrastructure and thereby in transport costs. We find that diminished transportation infrastructure had a significant negative impact on firms' exports.
Article
Timely deliveries have become more important in international trade in the recent decades, mostly because of the spread of international production fragmentation. This paper provides empirical evidence on the cost of time in trade by looking at how faster trade within the European Union (EU) contributed to the trade expansion with new EU members after the enlargement in 2004. I derive a bilateral trade cost index from trade data of EU countries in 19 manufacturing industries and years 2000–2006 and perform a double difference-in-differences estimation. The results show that the enlargement-induced decline in the trade cost index, and hence trade creation, was more than twice larger in industries, where production fragmentation is typically widespread. I proxy the improvement in timeliness by the decline in the waiting time at land border crossings and estimate that saving one hour at the border is like a 0.9% trade cost decline in ad valorem terms. Robustness checks, which account for the dominant transport mode or experiment with alternative measures of timeliness, confirm the main findings.
Article
This paper explores the role of financial factors in the 2008-9 collapse of U.S. imports and exports. Using highly disaggregated international trade data, we examine whether the cross-sectoral variation in how much imports or exports fell during this episode can be explained by financial variables. To do this, we employ a wide variety of possible indicators, such as standard measures of trade credit and external finance dependence, proxies for shipping lags at the sector level, and shares of intra-firm trade in each sector. Overall, there is very little evidence that financial factors played a role in the collapse of U.S. trade.
Article
We update the widely used banking crises database by Laeven and Valencia (2008, 2010) with new information on recent and ongoing crises, including updated information on policy responses and outcomes (i.e. fiscal costs, output losses, and increases in public debt). We also update our dating of sovereign debt and currency crises. The database includes all systemic banking, currency, and sovereign debt crises during the period 1970-2011. The data show some striking differences in policy responses between advanced and emerging economies as well as many similarities between past and ongoing crises.
Article
We show that the negative impact of financial crises on trade is magnified for destinations with longer time-to-ship. A simple model where exporters react to an increase in the probability of default of importers by increasing their export price and decreasing their export volumes to destinations in crisis is consistent with this empirical finding. For longer shipping time, those effects are indeed magnified as the probability of default increases as time passes. Some exporters also decide to stop exporting to the crisis destination, the more so the longer time-to-ship. Using aggregate data from 1950 to 2009, we find that this magnification effect is robust to alternative specifications, samples and inclusion of additional controls, including distance. The firm level predictions are also broadly consistent with French exporter data from 1995 to 2005.
Article
Recent empirical research in international trade has revealed overwhelming evidence that, in all countries, a remarkably small proportion of firms report exports in Customs statistics. A large share of these are wholesalers. This suggests that the number of firms active in foreign markets might be much greater than that suggested by a simple count of the firms directly reporting their exports. This paper thus sheds light on the role of wholesalers in international trade. Our model, which allows for quality differentiation, uses very general assumptions to show that intermediated exporters may contribute significantly to the extension of countries’ export opportunities. The model predicts a twofold role in international trade. First, wholesalers help less-efficient firms to supply foreign markets, thus increasing the number of exported varieties at the aggregate level. Second, they alleviate the difficulty of reaching less-accessible markets. We use French firm-level export data to provide empirical support for these two predictions.
Article
Existing empirical studies on trade costs and trade facilitation largely focus on aggregate impacts of reform due to data availability. We take a step toward filling in this gap in literature. Using the World Bank Enterprises Surveys, the study extends the scope of empirical literature to firm dimension with a focus on SMEs.
Article
This paper explores the importance of time in international trade. The framework for the discussion is a model in which products "depreciate" over time, perhaps because the characteristics of goods that consumers desire change randomly over time. On the supply side, production and trade also take time, but producers can choose to produce and trade faster at higher cost. Faster production is also assumed to be more intensive in the use of physical and/or human capital. Together, these assumptions have several implications about which countries will have comparative advantage in which goods, and also about how distances between countries interact with comparative advantage and the speed of trade. The paper includes observations about the roles of infrastructure and government regulations in influencing the time costs of trade, and it concludes with speculation about how Japanese producers have managed to deal with time in their trade.
Article
While the precise causes of post-war 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 provides a detailed accounting of the time-series pattern of shipping costs. Direct evidence from an eclectic mix of data shows that ocean freight rates have increased while air freight rates have declined rapidly. Indirect evidence suggests that the cost of overland transport has declined relative to ocean transport. For all modes, the freight costs associated with increased distance have declined. Data on the changing composition of trade are broadly consistent with these changes in relative prices.
Article
The literature on trade facilitation has mostly focused on implications for trade volumes. However, recent theoretical contributions have emphasized that trade costs – such as transaction costs related to cross-border trade procedures – affect both the traded volumes of “old” goods (the intensive margin) and the range of traded goods (the extensive margin). This paper therefore tests whether trade facilitation affects the extensive margin by counting the number of 8-digit products that are exported from developing to EU countries, and using this as the dependent variable in an estimation. Moreover, it also tests whether the extensive margins in differentiated and homogeneous goods are affected in the same way by transaction costs. Estimation results suggest that if export transaction costs – proxied by the number of days needed to export a good – declined by 1 per cent, the number of exported differentiated and homogeneous products would rise by 0.7 and 0.4 per cent respectively. Policy simulations further illustrate that if all countries were as efficient at the border as the most efficient country at the same level of development, the number of exported differentiated and homogeneous products would increase by 64 and 29 per cent respectively.
Article
This paper investigates the long-term stock price effects and equity risk effects of supply chain disruptions based on a sample of 827 disruption announcements made during 1989–2000. Stock price effects are examined starting one year before through two years after the disruption announcement date. Over this time period the average abnormal stock returns of firms that experienced disruptions is nearly –40%. Much of this underperformance is observed in the year before the announcement, the day of the announcement, and the year after the announcement. Furthermore, the evidence indicates that firms do not quickly recover from the negative effects of disruptions. The equity risk of the firm also increases significantly around the announcement date. The equity risk in the year after the announcement is 13.50% higher when compared to the equity risk in the year before the announcement.
Article
Purchasing goods from distant locations introduces a significant lag between when a product is shipped and when it arrives. These transit lags are trade barriers for firms facing volatile demand, who must place orders before knowing the resolution of demand uncertainty. We provide a model in which airplanes bring producers and consumers together in time. Fast transport allows firms to respond quickly to favorable demand realizations and to limit the risk of unprofitably large quantities during low demand periods. The model predicts that the likelihood and extent to which firms employ air shipments is increasing in the volatility of demand they face, decreasing in the air premium they must pay, and increasing in the contemporaneous realization of demand. We confirm all three conjectures using detailed US import data. Fast transport thus provides firms with a real option to smooth demand volatility on international markets, and we provide simple calculations of that option value. This enables us to identify how the option value relates to goods characteristics, and to changes in air transport premia associated with technological and policy change including the introduction of jet engines, and liberalization of trade in air services.
Article
This paper documents that intermediaries play an important role in facilitating international trade. We modify a heterogeneous firm model to allow for an intermediary sector. The model predicts that firms will endogenously select their mode of export - either directly or indirectly through an intermediary - based on productivity. The model also predicts that intermediaries will be relatively more important in markets that are more difficult to penetrate. We provide empirical confirmation for these predictions using the firm-level census of China's trade, and generate new facts regarding the activity of intermediaries. We also provide evidence that firms begin to export directly after exporting through intermediaries.
Article
Entering new export markets is primarily a discrete choice. Even though several empirical papers have used modeling strategies consistent with this fact, no study has examined the effects of public policies aimed at affecting this decision within this setting. In this paper we assess the impact of trade promotion activities on export outcomes using trade support and highly disaggregated export data for the entire population of exporters of Uruguay, a small developing country, over the period 2000–2007 to estimate a binary outcome model that allows for unobserved heterogeneity. We find that trade supporting activities have helped firms reach new destination countries and introduce new differentiated products. KeywordsExport promotion-Firm exports-Latin America-Uruguay JEL ClasificationF13-F14-L15-H32-H40-L25-O17-O24-C23
Article
Drawing on recently completed firm-level surveys in Bangladesh, Brazil, China, Honduras, India, Nicaragua, Pakistan, and Peru, this paper investigates the relationship between the investment climate and international integration. These standardized surveys of large, random samples of firms in common sectors reveal how firms experience bottlenecks and delays in hard infrastructure such as power and telecom as well as in soft infrastructure such as customs administration. We focus primarily on measures of the time or monetary cost of different bottlenecks (e.g., days to clear goods through customs, sales lost to power outages). For many of these costs, the obstacles are lower in China than in the South Asian or Latin American countries. There is also a systematic variation across cities within countries. We estimate a probit function for the probability that a randomly chosen firm is an exporter and a separate probit for the probability that a randomly chosen firm is foreign invested. These measures of international integration are higher where the investment climate is better.
Article
An important element of the cost of distance is time taken in delivering final and intermediate goods. We argue that time costs are qualitatively different from direct monetary costs such as freight charges. The difference arises because of uncertainty. Unsynchronised deliveries can disrupt production, and delivery time can force producers to order components before demand and cost uncertainties are resolved. Using several related models we show that this generates a hitherto unexplored mechanism for clustering. If final assembly takes place in two locations and component production has increasing returns to scale, then component production will tend to cluster around just one of the assembly plants.
Article
This paper explains why relative PPP should hold more tightly in emerging markets, and why pricing to market would be observed more frequently in the OECD countries. It studies the endogenous determination of pricing to market, in a real option model with time-dependent transportation costs, where the future terms of trade are random. Allowing time-dependent transportation costs adds a dimension of investment to the pre-buying of imports, implying that financial considerations determine the frequency of pricing to market, and the deviations from relative PPP. If the expected discounted cost of last minute delivery is higher than pre-buying, one exercises the option of spot market imports if the realized terms of trade are favorable enough. Pricing to market is observed in countries characterized by low terms of trade volatility and low financing costs. In these circumstances, imports are pre-bought, and the spot market for imports is inactive. In countries where the financing costs and the terms of trade volatility are high, few imports are pre-bought, the price of imports is determined by the realized real exchange rate, and a version of relative PPP holds. With an intermediate level of terms of trade volatility and of financing costs, a mixed regime is observed. If the realized real exchange rate is weak, pricing to market would prevail, increasing consumers’ welfare by shielding them from the adverse purchasing power consequences of weak terms of trade. If the realized real exchange rate is favorable enough, more imports are purchased in the spot market, and the relative PPP would hold. Higher financing costs increase the cost of pre-buying imports, reducing thereby the frequency of pricing to market, increasing the expected relative price of imports, reducing the expected deviations from relative PPP, and reducing welfare.
Article
I propose a network/search view of international trade in differentiated products. I present evidence that supports the view that proximity and common language/colonial ties are more important for differentiated products than for products traded on organized exchanges in matching international buyers and sellers, and that search barriers to trade are higher for differentiated than for homogeneous products. I also discuss alternative explanations for the findings.
Article
Most papers that employ Differences-in-Differences estimation (DD) use many years of data and focus on serially correlated outcomes but ignore that the resulting standard errors are inconsistent. To illustrate the severity of this issue, we randomly generate placebo laws in state-level data on female wages from the Current Population Survey. For each law, we use OLS to compute the DD estimate of its "effect" as well as the standard error of this estimate. These conventional DD standard errors severely understate the standard deviation of the estimators: we find an "effect" significant at the 5 percent level for up to 45 percent of the placebo interventions. We use Monte Carlo simulations to investigate how well existing methods help solve this problem. Econometric corrections that place a specific parametric form on the time-series process do not perform well. Bootstrap (taking into account the autocorrelation of the data) works well when the number of states is large enough. Two corrections based on asymptotic approximation of the variance-covariance matrix work well for moderate numbers of states and one correction that collapses the time series information into a "pre"-and "post"-period and explicitly takes into account the effective sample size works well even for small numbers of states.
Article
This paper aims to analyse the effect of trade facilitation on sectoral trade flows. We use data from the World Bank's Doing Business Database on the fees associated with completing the procedures to export or import goods in a country, on the number of documents needed and on the required time to complete all the administrative procedures to import and export. An augmented gravity equation is estimated for 13 exporters and 167 importers using a number of estimation techniques, namely OLS, PPML and the Harvey model. A common result is that trade flows increase by lowering transport costs and the number of days required to trade. The outcome supports multilateral initiatives, as that in the WTO, which encourages countries to assess their trade facilitation needs and priorities and to improve them. The measures adopted will not only benefit the country that improves trade facilitation, but also it's trading partners.
Article
In this paper, we consider a three-stage game in the context of a competing exporters model to compare and contrast the effects of discriminatory and uniform (Most Favored Nation, MFN) tariffs on countries' choice over environmental standards for varying degrees of pollution spillovers. Because of the presence of punishment effects and stronger own and cross-tariff effects, we find that discrimination yields higher standards than MFN (and free trade) independently of the extent of pollution spillovers. When pollution is local and incentives to free ride on other countries' abatement efforts are weak, we show, however, that welfare is larger under MFN than under discrimination. In a dynamic setting, we consider the impact of symmetric and asymmetric treatments on the sustainability of an international environmental agreement (IEA) and obtain that multilateral cooperation is easier to sustain under discrimination than under MFN (or free trade).
Article
It is assumed that added time to export adds cost to and lowers the volume of trade. Time delays may also affect the composition of trade and can disproportionately reduce trade in time-sensitive goods. This paper investigates the validity of these propositions using the World Bank Doing Business database and Enterprise Surveys for 64 developing countries. The authors find that in countries where there is longer time needed to export firms in time-sensitive industries are less likely to become exporters. Moreover, firms that do export have lower export intensities. Their findings imply that time to export is a significant determinant of comparative advantage. For example, consider two industries that have the same export probability and intensity - but differ in time-sensitivity by one standard deviation. Action taken to cut time to export by 50 percent for one industry opens a 6 percentage point difference between the export probabilities of the two industries. In addition, steps to cut time delays increase export intensities by 1.9 percentage points. This impact applies to industries with different productivity levels -- and those in developing countries with different income levels.
Article
Africa's share of global exports has dropped by 50 percent over the last three decades. To stem this decline, aid for trade to the region has increased rapidly in recent years. Assistance can target improvements in three important components of trade facilitation: transit times, documentation, and ports and customs. Of these, transit delays have the most economically and statistically significant effect on exports. Specifically, a one day reduction in inland travel times leads to a 7 percent increase in exports, after controlling for the standard determinants of trade and potential endogeneity. Put another way, a one day reduction in inland travel times translates into a 2 percentage point decrease in all importing-country tariffs. By contrast, longer delays in the other areas have a far smaller impact on trade. Large transit delays are relatively more harmful because they are associated with high (within-country) variation, making delivery targets difficult to meet. Finally, the results imply that transit times are primarily about institutional features—such as border delays, road quality, fleet class and competition and security—and not geography.
Article
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.
Article
Cross border transactions are conducted using different payment contracts, the usage of which varies across countries and over time. In this paper I build a model that can explain this observation and study implications from this for international trade. In the model exporters optimally choose payment contracts, trading off differences in enforcement and efficiency between financial markets in different countries. I find that the ability of firms to switch contracts is central to the reaction of trade to variations in financial conditions. Numerical experiments with a two-country version of the model suggest that limiting the choice between payment contracts reduces traded quantities by up to 60 percent.
Article
This article proposes a memory-saving decomposition of the design matrix to facilitate the estimation of a linear model with two high-dimensional fixed effects. A common way to fit such a model is to take into account one of the effects by including dummy variables and to sweep out the other effect by the within transformation (fixed-effects transformation). If the number of panel units is high, creating and storing the dummy variables can involve prohibitively large computer-memory requirements. The memory-saving procedure to set up the moment matrices for estimation presented in this article can reduce the memory requirements considerably. The companion Stata ado-file felsdvreg implements the estimation method, takes care of identification issues, and provides useful summary statistics. Copyright 2008 by StataCorp LP.
Article
Most papers that employ Differences-in-Differences estimation (DD) use many years of data and focus on serially correlated outcomes but ignore that the resulting standard errors are inconsistent. To illustrate the severity of this issue, we randomly generate placebo laws in state-level data on female wages from the Current Population Survey. For each law, we use OLS to compute the DD estimate of its "effect" as well as the standard error of this estimate. These conventional DD standard errors severely understate the standard deviation of the estimators: we find an "effect" significant at the 5 percent level for up to 45 percent of the placebo interventions. We use Monte Carlo simulations to investigate how well existing methods help solve this problem. Econometric corrections that place a specific parametric form on the time-series process do not perform well. Bootstrap (taking into account the autocorrelation of the data) works well when the number of states is large enough. Two corrections based on asymptotic approximation of the variance-covariance matrix work well for moderate numbers of states and one correction that collapses the time series information into a "pre"- and "post"-period and explicitly takes into account the effective sample size works well even for small numbers of states. © 2004 the President and Fellows of Harvard College and the Massachusetts Institute of Technology
Article
This paper briefly reviews new indices of trade restrictiveness and trade facilitation that have been developed at the World Bank. The paper also compares the trade impact of different types of trade restrictions applied at the border with the effects of domestic policies that affect trade costs. 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. This is because the value of trade preferences is quite limited: a new measure of the relative preference margin developed in the paper reveals that this is very low for most country-pairs. Most countries with very good (duty-free) access to a market generally have competitors that have the same degree of access. The empirical analysis suggests that measures to improve logistics performance and facilitate trade are likely to have the greatest positive effects in expanding developing country trade, increasing the trade impacts of lowering remaining border barriers by a factor of two or more.
Article
Using firm-level data on manufacturing sectors in Africa, this paper addresses how domestic supply constraints and other firm characteristics explain the geographical orientation of firms'exports and the overall market diversification of African manufacturing exports. The degree of market diversification, measured by the number of export destinations, is highly correlated with export intensity at the firm level, and both embody strong scale effects. Technological factors, such as new vintage capital and Internet access, which improve production efficiency and lower export costs, show strong effects on the firm-level export intensity. Some qualitative differences exist between Africa's regional exports and exports to the global markets. Foreign ownership is a significant factor in characterizing the intensity of global exports but not regional exports. The technological factors are significant in both cases, but more so in global exports. Public infrastructure constraints, such as inferior power services and customs delays, seem to have more immediate impacts on regional exports in general, implying the relevance of addressing behind-the-border constraints in fostering regional integration in Africa. Customs efficiency does matter for textile exports to the global markets, underscoring the importance of improving trade facilitation in Africa for competitive participation of African producers in global supply chain industries.