Trade and Development: New Issues – ComDev

New methodologies are developed, especially in terms of econometric analyses, in order to study the link between tariff liberalisation, aid for trade, and international integration of developing countries. We account for endogeneity, simultaneity in decisions, heterogeneity in terms of impact. A randomized experiment is also conducted. The project also uses new datasets or suggests new combinations of existing datasets.

Results show the importance of the rules of origin within preferential trade agreements. Their omission in the estimation of the trade effect of these agreements biases the results. Furthermore, the results indicate that non-tariff measures induce an increase in the prices of African food products (around 15%) and the poorest households are the most affected by this increase. The harmonization of norms and standards, or their mutual recognition, within trade agreements tends to reduce significantly the additional costs induced by these non-tariff measures. Besides, the externalities generated by these norms and standards should be accounted for in the computation of trade restrictiveness indices. Their omission also induces biases.

Export promotion programmes in developing countries tend to have a small impact. Given the low number of beneficiary firms, their small size, and the small marginal effect, these programmes did not have a significant impact on Tunisian exports. Furthermore, the mechanisms behind the emergence of big hit exports in emerging and developing countries are quite complex.

Finally, microeconomic analyses suggest that trade liberalization has a heterogeneous effect. This heterogeneity is observed spatially (urban vs. rural households) and socially (rich vs. poor households).

A new research group, working on trade and development issues, has emerged within Paris School of Economics. Current work in progress will be achieved within the next months.

Different research papers were produced and published in top rank journals (journals ranked 1 or 2 in the CNRS ranking used in Economics; the Journal of International Economics is the top journal in international economics). Besides, results were presented in several conferences and described in one VOX-EU column, one CEPII Letter and one G-MonD PSE column.

The ANR project ComDev re-examines the link between trade and development in the 21th century, based on the recent advances in international trade theory and in development microeconomics. Methodologies used in international trade and development economics have recently converged. Researchers and experts in both topics have also increased their cooperation.
The emergence of new methodologies and the increasing availability of disaggregated data allow studying new aspects of trade openness and providing new results that should be valued per se by the scientific community.
The project is based on three inter-related tasks. The first one gives the state of the art of developing countries' participation in international trade, with respect to market access. The project will study the tariff preferences (and their likely erosion) offered by developed countries to developing countries, with a focus on agricultural goods. The project will also examine the non tariff measures (in particular, sanitary and phytosanitary measures and technical barriers to trade). Using a new database and new estimation strategies, we will investigate the cost of protectionism embodied in these measures.
The second task is devoted to macroeconomic aspects and analyses the tools used by developing countries to improve their international openness. The project will first assess an export promotion program developed in the Middle East and North Africa (MENA) region. Using custom data at the firm- and product-level, we will compare performances of firms benefiting from the program’ to the performances of firms included in the control group. Furthermore, the project will investigate the export big hits of developing countries. The recent literature shows that developing countries’ exports are likely to be concentrated on few products. We will study the big hits of the MENA region (key region for the European Union) and investigate which public policy instruments are more significant for the emergence of these export success products.
The third task studies microeconomic aspects linked to developing countries’ trade openness, with a focus on urban and rural households. In developing countries, households are likely to be both consumers and producers of agricultural goods. A study on Indonesia, a country where households’ panel data are available for the period 1993-2007, will look at the impact of trade liberalization on households’ consumption and income. The project will also provide an impact evaluation of an innovative pilot project aimed at increasing commercialization and export of high value vegetable products among poor rural Cambodian producers. This research will help the understanding of barriers faced by small producers in their access to international markets (lack of information, lack of credit or insurance, etc.).