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Does Aid for Trade Enhance Export Performance? Investigating the Infrastructure Channel

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  • Mariana Vijil
  • Laurent Wagner

Abstract

There are few empirical studies assessing the effectiveness of aid for trade as regards trade performance. Furthermore, existing work does not test which are the channels through which aid for trade has an impact on trade performance. We address this question using a two-step empirical analysis. Relying on an export performance model, we first test whether institutions and infrastructure, our two potential channels of transmission, are significant determinants of export performance. Second, we test the impact of aid for trade sectoral flows on the previously detected determinants of export performance. We show, as part of the first step, that the infrastructure channel is a highly significant determinant of export performance, whereas the institutional channel turns out to have a limited positive impact on developing countries’ export performance. Furthermore, we show, from the second step, that aid for infrastructure, once instrumented, has a strong and positive impact on the infrastructure level. As a result, we find that a ten per cent increase in aid for infrastructure commitments per capita in developing countries leads to an average 2.34 per cent increase in the exports over GDP ratio. It is also equivalent to a 2.71 per cent reduction in tariff and nontariff barriers. These results highlight the high potential impact of aid for trade on developing countries’ export performance throughout the infrastructure channel.

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File URL: http://hdl.handle.net/10.1111/j.1467-9701.2012.01437.x
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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 35 (2012)
Issue (Month): 7 (07)
Pages: 838-868

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Handle: RePEc:bla:worlde:v:35:y:2012:i:7:p:838-868

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Cited by:
  1. Cadot, Olivier & Fernandes, Ana & Gourdon, Julien & Mattoo, Aaditya & de Melo, Jaime, 2014. "Evaluating aid for trade : a survey of recent studies," Policy Research Working Paper Series 6742, The World Bank.
  2. d’Aiglepierre, Rohen & Wagner, Laurent, 2013. "Aid and Universal Primary Education," Economics of Education Review, Elsevier, vol. 37(C), pages 95-112.
  3. Celbis, Mehmet Güney & Nijkamp, Peter & Poot, Jacques, 2013. "How big is the impact of infrastructure on trade? Evidence from meta-analysis," MERIT Working Papers 032, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  4. Martinez-Zarzoso, Inmaculada & Nowak-Lehmann D., Felicitas & Rehwald, Kai, 2014. "Is aid for trade effective? A quantile regression approach," Center for European, Governance and Economic Development Research Discussion Papers 210, University of Goettingen, Department of Economics.
  5. Philipp Hühne & Birgit Meyer & Peter Nunnenkamp, 2013. "Who Benefits from Aid for Trade? Comparing the Effects on Recipient versus Donor Exports," Kiel Working Papers 1852, Kiel Institute for the World Economy.

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