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Does aid for trade enhance export performance? Investigating on the infrastructure channel

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  • Mariana Vijil
  • Laurent Wagner

Abstract

Today, there are few empirical studies assessing the effectiveness of aid for trade on trade pe rformance. Furthermore, existing works do not test channels by which this impact is transiting. We address this question using an empirical analysis constructed in two steps. Following a model of export performance, we first test if institutions and infrastructure, our two potential channels of transmission, are indeed determinants of export performance. Secondly, we test the impact of aid for trade sectoral flows on the determinants that were highlighted in the first part. We show that the infrastructure channel appears to be highly significant in the first step whereas the institutional one turns out to have limited impact on developing countries’ exports. Furthermore, in our second step, aid for infrastructure seems, once instrumented, to have a strong and positive impact on the infrastructure level. Our results indicate that a 10% increase in aid to infrastructure commitments per capita leads to an average increase of the exports over GDP ratio for a developing country of 2.34%. It is also equivalent to a 2.71% reduction of the tariff and non-tariff barriers. This highlights the very high economic impact of aid for trade throughout the channel of infrastructures.

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Bibliographic Info

Paper provided by INRA UMR SMART in its series Working Papers SMART - LERECO with number 10-07.

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Length: 40 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:rae:wpaper:rae:wpaper:201007

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Keywords: Export performance; trade facilitation; aid for trade; infrastructure; institution;

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  1. Marilyne Huchet-Bourdon & Anna Lipchitz & Audrey Rousson, 2009. "Aid for Trade in Developing Countries: Complex Linkages for Real Effectiveness," African Development Review, African Development Bank, vol. 21(2), pages 243-290.
  2. David Hummels & Volodymyr Lugovskyy & Alexandre Skiba, 2007. "The Trade Reducing Effects of Market Power in International Shipping," NBER Working Papers 12914, National Bureau of Economic Research, Inc.
  3. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
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