Working Paper: CEPR ID: DP9690
Authors: Olivier Cadot; Ana Fernandes; Julien Gourdon; Aaditya Mattoo; Jaime de Melo
Abstract: The demand for accountability in ?Aid-for-Trade? (AFT) is increasing but monitoring has focused on case-studies and impressionistic narratives. The paper reviews recent evidence from a wide range of studies, recognizing that a multiplicity of approaches is needed to learn what works and what does not. The review concludes that there is some support for the emphasis on reducing trade costs through investments in hard infrastructure (like ports and roads) and soft infrastructure (like customs). But failure to implement complementary reform ? especially the introduction of competition in transport services ? may erode the benefits of these investments. Direct support to exporters does seem to lead to diversification across products and destinations, but it is not yet clear that these benefits are durable. In general, it is difficult to rely on cross-country studies to direct AFT. More rigorous impact evaluation (IE) is an under-utilized alternative, but situations of ?clinical interventions? in trade are rare and adverse incentives (due to agency problems) and costs (due to the small size of project) are a hurdle in implementation.
Keywords: aid for trade; AFT; gravity; impact evaluation; trade performance
JEL Codes: F15; F35
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Aid for trade investments (hard and soft infrastructure) (O19) | Reduce trade costs (F19) |
| Aid for trade investments (hard and soft infrastructure) + Complementary reforms in transport services (O19) | Realized benefits of investments (G11) |
| Direct support to exporters (F10) | Diversification in products and destinations (Z39) |
| Aid for trade (AFT) (F35) | Increased total exports for beneficiary firms (F10) |
| Confounding factors (C39) | Difficulty in establishing causal links (C22) |