Is aid for trade effective? A panel quantile regression approach

The empirical literature on aid for trade (AfT) mainly considers its effects on merchandise trade and investment. In this paper, we provide an in‐depth analysis of the relationship between AfT and trade in services using both aggregate and bilateral data. We find a statistically weak effect of AfT on both goods and services trade in our aggregate analysis once we account for endogeneity in the AfT–trade relationship. In contrast, the bilateral analysis suggests that AfT, in particular that allocated to services activities, especially economic infrastructure, has a positive effect on recipients’ merchandise exports to donor countries. This novel finding is robust across different lag structures and provides evidence of complementarities between services AfT and goods trade.

show abstract

“… This is consistent with other studies in the literature such as Cali and te Velde () and Martínez‐Zarzoso et al. (). …”

supporting

confidence: 93%

Aid for trade and international transactions in goods and services

Hoekman

Shingal

2019

Rev International Economics

View full text Add to dashboard Cite

show abstract

“…The empirical specification and choice of explanatory variables are motivated in existing literature (Cali and Te Velde, 2011;Martínez-Zarzoso et al 2017;Hoekman and Shingal, 2020). The control vector, Z zjt , comprises a measure of country size -the log of population (P OP jt ); a measure of geographic distance to global markets -the log of market penetration (MP jt ) computed as a distance (d ij ) weighted measure of other countries' GDP (GDP it ) i.e.…”

Section: Empirical Strategymentioning

confidence: 99%

Quantifying Barriers to Movement of Service Suppliers and Examining Their Effects

Shingal

2020

SSRN Journal

View full text Add to dashboard Cite

The importance of services trade and "servicification" of economic activity has grown in countries overtime. However, regulatory and administrative barriers to the movement of service suppliers have meant that "Mode 4" accounted for only 2.1% of total services trade in 2005 and 2.9% in 2017. While trade costs for services have been computed in the literature, barriers specific to Mode 4 services trade have not yet been quantified. We contribute by constructing an index to quantify regulatory barriers to the movement of service suppliers, using qualitative information embedded in OECD data on services trade restrictions, and estimate its effects on the four "modes" of services supply. Results show that the Mode 4 restrictiveness index is negatively correlated with services imports in three of the four modes of services delivery that require proximity between buyers and sellers. These findings underline the need for countries to refrain from imposing prohibitive restrictions on service suppliers in the wake of Covid-19.

show abstract

“…Work that accounts for endogeneity in the aggregate AfT-trade relationship generally finds weaker effects of AfT on aggregate merchandise trade of recipient countries. More recently, attention has moved to also studying the services trade effects of AfT (Ferro et al 2014;Martínez-Zarzoso et al 2017;Hoekman and Shingal, 2020). The focus on services emanates from the increasing role that services are playing in all sectors of the economy and in international trade.…”

Section: Introduction *mentioning

confidence: 99%

Aid for Trade and Trade in Services

Hoekman

Shingal

2020

SSRN Journal

View full text Add to dashboard Cite

Existing research generally finds weak positive effects of aid for trade (AfT) on aggregate merchandise trade of recipients once endogeneity in the AfT-trade relationship is accounted for. In this paper, we confirm weak findings for both aggregate merchandise and services trade of recipients, using GMM and IV estimations. Moreover, estimates lose statistical significance if non-AfT explanatory variables are treated as endogenous in estimation suggesting identification issues may not have been adequately addressed in extant work. We then examine an alternative proposition: that effects of AfT and different categories of AfT may be observed along the conditional distributions of exports and imports. Our findings confirm this hypothesis. AfT allocated to economic infrastructure, productive capacity building in services and trade policies and regulation is more effective for smaller trading economies, especially in services. We also observe considerable heterogeneity in the trade effects of AfT allocated to individual services sectors, indicating the importance of country-specific diagnostics in targeting AfT allocation.

show abstract

Is aid for trade effective? A panel quantile regression approach

Abstract: This paper investigates whether Aid for Trade (AfT)

Cited by 45 publications

References 25 publications

Aid for trade and international transactions in goods and services

Aid for trade and international transactions in goods and services

Quantifying Barriers to Movement of Service Suppliers and Examining Their Effects

Aid for Trade and Trade in Services

Contact Info

Product

Resources

About