BizCLIR

Author (s):

Simeon Djankov, Caroline Freund, and Cong S. Pham

Date:

August 2007

Publication (if applicable):

N/A

Abstract (if Available):

We determine how time delays affect international trade, using newly collected data on the days it takes to move standard cargo from the factory gate to the ship in 98 countries. We estimate a difference gravity equation that controls for remoteness, and find significant effects of time costs on trade. We find that each additional day that a product is delayed prior to being shipped reduces trade by more than one percent. Put differently, each day is equivalent to a country distancing itself from its trade partners by about 70 km on average. We control for potential endogeneity using a sample of landlocked countries and instrumenting for time delays with export times abroad. We also find that delays have an even greater impact on exports of time-sensitive goods, such as perishable agricultural products. Our results highlight the importance of reducing trade costs (as opposed to tariff barriers) to stimulate exports.

URL:

http://www.doingbusiness.org/Documents/TradingOnTime_aug07.pdf