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Aid for Trade and Trade in Services

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  • Bernard Hoekman
  • Anirudh Shingal

Abstract

Existing research generally finds weak positive effects of aid for trade (AfT) on aggregate merchandise trade of recipients once endogeneity in the AfT-trade relationship is accounted for. In this paper, we confirm weak findings for both aggregate merchandise and services trade of recipients, using GMM and IV estimations. Moreover, estimates lose statistical significance if non-AfT explanatory variables are treated as endogenous in estimation suggesting identification issues may not have been adequately addressed in extant work. We then examine an alternative proposition: that effects of AfT and different categories of AfT may be observed along the conditional distributions of exports and imports. Our findings confirm this hypothesis. AfT allocated to economic infrastructure, productive capacity building in services and trade policies and regulation is more effective for smaller trading economies, especially in services. We also observe considerable heterogeneity in the trade effects of AfT allocated to individual services sectors, indicating the importance of country-specific diagnostics in targeting AfT allocation.

Suggested Citation

  • Bernard Hoekman & Anirudh Shingal, 2021. "Aid for Trade and Trade in Services," Journal of Development Studies, Taylor & Francis Journals, vol. 57(10), pages 1723-1738, October.
    • Handle: RePEc:taf:jdevst:v:57:y:2021:i:10:p:1723-1738
    DOI: 10.1080/00220388.2021.1873287
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    Cited by:

    1. Shuhei Nishitateno & Hayato Umetani, 2023. "Heterogeneous effects of Aid‐for‐Trade on donor exports: Why is Japan different?," Review of International Economics, Wiley Blackwell, vol. 31(3), pages 1117-1145, August.
    2. JunYun Kim & Hongshik Lee & Joonhyung Lee, 2022. "Does Aid for Trade Promote Vertical Specialization?," Asian Economic Journal, East Asian Economic Association, vol. 36(2), pages 127-158, June.

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