Trade Facilitation Effects on International Trade: Evidence From Lower-Middle and Upper-Middle-Income Countries

Abstract

This paper presents an empirical analysis of the impact of trade facilitation on international trade, as well as the effects of two dimensions: hard and soft infrastructure. Using 18 primary variables, we constructed four indicators of 30 lower-middle-income and 33 upper-middle-income countries over the period 2011-2017. After applying the system-generalised method of moments (GMM), the main finding is that all trade facilitation indicators have a significant effect on exports. However, improvements in physical infrastructure are more likely to increase exports than the efficiency of borders, transport, information and communication technologies (ICTs) and institutions, from the most significant to the least significant. It is also found that the effect of hard infrastructure on exports is virtually the same as that of soft infrastructure. Hard and soft infrastructure must therefore be considered at the same level, as the effectiveness of international trade depends on both.