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Need for Speed: Is Faster Trade in the EU Trade-creating?

  • Cecília Hornok

    ()

    (Central European University)

Timely deliveries have become more important in international trade in the recent decades, mostly because of the spread of international production fragmentation. This paper provides empirical evidence on the cost of time in trade by looking at how faster trade within the European Union (EU) contributed to the trade expansion with new EU members after the enlargement in 2004. I derive a bilateral trade cost index from trade data of EU countries in 19 manufacturing industries and years 2000–2006 and perform a double difference-in-differences estimation. The results show that the enlargement-induced decline in the trade cost index, and hence trade creation, was more than twice larger in industries, where production fragmentation is typically widespread. I proxy the improvement in timeliness by the decline in the waiting time at land border crossings and estimate that saving one hour at the border is like a 0.9% trade cost decline in ad valorem terms. Robustness checks, which account for the dominant transport mode or experiment with alternative measures of timeliness, confirm the main findings.

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File URL: http://www.mnb.hu/letoltes/wp-2012-04.pdf
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Paper provided by Magyar Nemzeti Bank (Central Bank of Hungary) in its series MNB Working Papers with number 2012/4.

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Length: 40 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:mnb:wpaper:2012/4
Contact details of provider: Web page: http://www.mnb.hu/

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  1. David S. Jacks & Christopher M. Meissner & Dennis Novy, 2009. "Trade Booms, Trade Busts, and Trade Costs," CESifo Working Paper Series 2767, CESifo Group Munich.
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  6. Cecília Hornok, 2010. "Trade-Enhancing EU Enlargement and the Resurgence of East-East Trade," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 79-94.
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