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Does Aid for Trade Enhance Export Performance? Investigating 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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Suggested Citation

  • Mariana Vijil & Laurent Wagner, 2012. "Does Aid for Trade Enhance Export Performance? Investigating the Infrastructure Channel," The World Economy, Wiley Blackwell, vol. 35(7), pages 838-868, July.
    • Handle: RePEc:bla:worlde:v:35:y:2012:i:7:p:838-868
    DOI: j.1467-9701.2012.01437.x
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    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F10 - International Economics - - Trade - - - General
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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