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Trade costs, barriers to entry, and export diversification in developing countries

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Author Info

  • Dennis, Allen
  • Shepherd, Ben

Abstract

This paper finds that a 1 percent reduction in the cost of exporting or the cost of international transport is associated with an export diversification gain of 0.3 percent or 0.4 percent respectively. Lower domestic market entry costs can also promote diversification, but the elasticity is weaker (-0.1). To obtain these results, the authors construct new measures of export diversification for 118 developing countries using highly detailed 8-digit mirror data from the European Union. The analysis also incorporates new export cost data from the World Bank's Doing Business database, covering document preparation, inland transport, administrative fees, and port/customs charges. Findings are highly robust, including to the use of geography and colonial history as instruments for trade and entry costs. Both the signs and relative magnitudes of these effects are consistent with predictions from a heterogeneous firms model of trade with asymmetric costs.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4368.

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Date of creation: 01 Sep 2007
Date of revision:
Handle: RePEc:wbk:wbrwps:4368

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Keywords: Housing&Human Habitats; E-Finance and E-Security; Mining&Extractive Industry (Non-Energy); Educational Technology and Distance Education; Transport Economics Policy&Planning;

This paper has been announced in the following NEP Reports:

References

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Citations

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Cited by:
  1. Persson, Maria, 2010. "Trade Facilitation and the Extensive Margin," Working Paper Series 828, Research Institute of Industrial Economics.
  2. Brooks, Douglas H. & Stone, Susan F., 2010. "Accelerating Regional Integration: Issues at the Border," ADBI Working Papers 200, Asian Development Bank Institute.
  3. Yann Duval & Chorthip Utoktham, 2011. "Trade Facilitation in Asia and the Pacific: Which Policies and Measures affect Trade Costs the Most?," Working Paper Series 111, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  4. Shepherd , Ben & Wilson, John S., 2008. "Trade facilitation in ASEAN member countries : measuring progress and assessing priorities," Policy Research Working Paper Series 4615, The World Bank.
  5. Konstantins Benkovskis, 2012. "Competitiveness of Latvia's Exporters," Working Papers 2012/03, Latvijas Banka.
  6. Konstantins Benkovskis & Ramune Rimgailaite, 2010. "The Quality and Variety of Exports from New EU Member States: Evidence from Very Disaggregated Data," Working Papers 2010/02, Latvijas Banka.
  7. Yue Li & John S. Wilson, 2009. "Trade Facilitation and Expanding the Benefits of Trade: Evidence from Firm Leval Data," Working Papers 7109, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
  8. Yann Duval & Chorthip Utoktham, 2011. "Trade costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation," Working Paper Series 411, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  9. Santos Silva, J.M.C. & Tenreyro, Silvana & Wei, Kehai, 2014. "Estimating the extensive margin of trade," Journal of International Economics, Elsevier, vol. 93(1), pages 67-75.
  10. Persson, Maria, 2008. "Trade Facilitation and the Extensive and Intensive Margins of Trade," Working Papers 2008:13, Lund University, Department of Economics.

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