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GTAP Resource #2779

"Modeling Endogenous Trade Facilitation"
by Mirza, Tasneem

The existing empirical literature estimates significant increases in international trade flows from trade facilitation efforts particularly in developing countries. One caveat in this literature is that empirical models do not account for the possibility of two-way causality between trade facilitation and trade flows. Similar to this literature we believe that poor quality of border infrastructure increase trade costs and reduce exporter competitiveness. This paper adds the belief that countries with larger trade has greater incentives to invest on better border infrastructure, since fixed costs are spread over more goods. We incorporate this idea into a theoretical model of monopolistic competition in international trade that predicts endogenous investments in border logistics by analyzing the costs and benefits of reforms. This enables to obtain a better understanding of the relationship between infrastructural investments at the borders and trade flows, and derive an econometric model that correctly measures the magnitude of effects.

Resource Details (Export Citation) GTAP Keywords
Category: 2008 Conference Paper
Status: Published
By/In: Presented at the 11th Annual Conference on Global Economic Analysis, Helsinki, Finland
Date: 2008
Created: Mirza, T. (4/15/2008)
Updated: Mirza, T. (12/18/2009)
Visits: 2,260
- Economic growth
- Economic development

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