Does Trade Facilitation Matter in Bilateral Trade

Abstract

This paper estimates an augmented gravity model incorporating different aspects of trade facilitation in developed and developing countries. Trade facilitation is defined as measures that aim at making international trade easier by eliminating administrative delays, simplifying commercial procedures, increasing transparency, security and incorporating new technologies in trade. This paper provides new theoretical and empirical enhancements. On the one hand, the model is based on theoretical foundations related to monopolistic competition and border effects. The originality of this paper is that trade facilitation facets are included in the model. On the other hand, the empirical achievement of the paper is that it takes into account many features of trade facilitation using the Doing Business database (World Bank) in two steps. First, the transaction time to import and to export is estimated and then is introduced in the gravity model. The results show that internet, bureaucracy and geographic variables affect the transaction time to import and to export. Time to import has a higher negative impact on trade then that to export. When sectoral characteristics are taken into account, some perishable (food and beverages), seasonal (wearing apparels) and high-value added products appear to be more sensitive to transaction time than other products.

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