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

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  • 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
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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. Brooks, Douglas H. & Stone, Susan F., 2010. "Accelerating Regional Integration: Issues at the Border," ADBI Working Papers, Asian Development Bank Institute 200, Asian Development Bank Institute.
  2. Konstantins Benkovskis & Ramune Rimgailaite, 2010. "The Quality and Variety of Exports from New EU Member States: Evidence from Very Disaggregated Data," Working Papers, Latvijas Banka 2010/02, Latvijas Banka.
  3. Maria Persson, 2013. "Trade facilitation and the extensive margin," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 22(5), pages 658-693, August.
  4. Persson, Maria, 2008. "Trade Facilitation and the Extensive and Intensive Margins of Trade," Working Papers, Lund University, Department of Economics 2008:13, Lund University, Department of Economics.
  5. Santos Silva, J.M.C. & Tenreyro, Silvana & Wei, Kehai, 2014. "Estimating the extensive margin of trade," Journal of International Economics, Elsevier, Elsevier, vol. 93(1), pages 67-75.
  6. Konstantins Benkovskis, 2012. "Competitiveness of Latvia's Exporters," Working Papers, Latvijas Banka 2012/03, Latvijas Banka.
  7. 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.
  8. Yann Duval & Chorthip Utoktham, 2011. "Trade Facilitation in Asia and the Pacific: Which Policies and Measures affect Trade Costs the Most?," Working Paper Series, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 111, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  9. Yue Li & John S. Wilson, 2009. "Trade Facilitation and Expanding the Benefits of Trade: Evidence from Firm Leval Data," Working Papers, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada. 7109, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
  10. Yann Duval & Chorthip Utoktham, 2011. "Trade costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation," Working Paper Series, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 411, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

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