This article investigates the effect of aid-for-trade (AfT) inflows on beneficiary-countries’ export structure. It additionally examines whether this effect depends on recipient-countries’ level of trade policy liberalisation. Export structure is measured by the ratio of exports of low-skilled and technology-intensive manufactures to total primary export products (LOW), the ratio of exports of medium-skilled and technology-intensive manufactures to total primary export products (MEDIUM) and the ratio of exports of high-skilled and technology-intensive manufactures to total primary export products (HIGH). The analysis has been carried out using an unbalanced panel data set of 121 countries (of which 41 least-developed countries [LDCs]) over the period 2002–2015. Using the two-step generalised methods of moments (GMM) approach, the empirical results show that AfT inflows exert a positive and significant impact on recipient countries’ export ratios LOW and HIGH, but not on the MEDIUM export ratio. For LDCs, AfT inflows influence positively LOW and negatively MEDIUM and HIGH. Furthermore, for both the full sample and LDCs, there is a strong positive effect of the cumulative AfT inflows on the three export ratios. Finally, the effect of AfT inflows on export ratios appears to be dependent on the degree of trade policy liberalisation.
AgosinM. R. (1991). Trade policy reform and economic performance: A review of the issues and some preliminary evidence (UNCTAD Discussion Paper No. 1991 (41)). Geneva: UNCTAD.
2.
AhmedN. (2000). Export response to trade liberalization in Bangladesh: A cointegration. analysis. Applied Economics, 32(8), 1077–1084.
3.
ArellanoM.BondS. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58(2), 277–297.
4.
BaldwinR. E.BraconierH.ForslidR. (2005). Multinationals, endogenous growth, and technological spillovers: Theory and evidence. Review of International Economics, 13(5), 945–963.
5.
BarroR. J.Sala-i-MartinX. (1997). Technological diffusion, convergence, and growth. Journal of Economic Growth, 2(1), 2–26.
6.
BearceD. H.FinkelS. E.Pérez-LiñánA. S.Rodríguez-ZepedaJ.Surzhko-HarnedL. (2013). Has the new aid for trade agenda been export effective? Evidence on the impact of US AfT allocations 1999–2008. International Studies Quarterly, 57(1), 163–170.
7.
BeckT. (2002). Financial development and international trade: Is there a link? Journal of International Economics, 57(1), 107–131.
8.
BlundellR.BondS. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143.
9.
BuchananB. G.LeQ. V.RishiM. (2012). Foreign direct investment and institutional quality: Some empirical evidence. International Review of Financial Analysis, 21(C), 81–89.
10.
BusseM.HoekstraR.KönigerJ. (2012). The impact of aid for trade facilitation on the costs of trading. Kyklos, 65(2), 143–163. doi:10.1111/j.1467-6435.2012.00531.x
11.
CaliM.VeldeTeD.W. (2011). Does aid for trade really improve trade performance? World Development, 39(5), 725–740.
12.
ClarkeR.KirkpatrickC. (1992). Trade policy reform and economic performance in developing countries: Assessing the empirical evidence. In AdhikariR.KirkpatrickC.WeissJ. (Eds.), Industrial and trade policy reform in developing countries (pp. 56–73). Manchester: Manchester University Press.
13.
DollarD. (1992). Outward-oriented developing economies really do grow more rapidly: Evidence from 95 LDCs, 1976-1985. Economic Development and Cultural Change, 40(3), 523–544.
14.
GhimireS.MukherjeeD.AlviE. (2016). Aid-for-trade and export performance of developing countries. Applied Econometrics and International Development, 16(1), 23–34.
15.
GlobermanS.ShapiroD. (2002). Global foreign direct investment flows: The role of governance infrastructure. World Development, 30(11), 1899–1919.
16.
GreenawayD.SapsfordD. (1994). What does liberalisation do for exports and growth. Weltwirtschaftliches Archiv, 130(1), 152–174.
17.
GrossmanG. M.HelpmanE. (1991). Innovation and growth in the global economy. Cambridge, MA and London: MIT Press.
18.
HarriganJ.MosleyP. (1991). Evaluating the impact of World Bank structural adjustment lending: 1980–87. Journal of Development Studies, 27(3), 63–94.
19.
HelbleM. C.MannC. L.WilsonJ. S. (2012). Aid-for-trade facilitation. Review of World Economics (Weltwirtschaftliches Archiv), 148(2), 357–376.
20.
HühneP.MeyerB.NunnenkampP. (2014a). Who benefits from aid for trade? Comparing the effects on recipient versus donor exports. Journal of Development Studies, 50(9), 1275–1288.
21.
HühneP.MeyerB.NunnenkampP. (2014b). Aid for trade: Assessing the effects on recipient exports of manufactures and primary commodities to donors and non-donors (Kiel Working Papers, No. 1953). Kiel, Germany: Kiel Institute for the World Economy (IfW).
22.
HynesW.HoldenP. (2016). What future for the global aid for trade initiative? Towards an assessment of its achievements and limitations. Development Policy Review, 34(4), 593–619.
23.
JansenM.NordåsH. K. (2004). Institutions, trade policy and trade flows (WTO Staff Working Paper No. ERSD-2004-02). London: CEPR.
24.
JenkinsR. (1996). Trade liberalisation and export performance in Bolivia. Development and Change, 27(4), 693–716.
25.
JuJ.YiW.LiZ. (2010). The impact of trade liberalization on the trade balance in developing countries. IMF Staff Papers, 57(2), 427–449.
26.
KaufmannD.KraayA.MastruzziM. (2010). The worldwide governance indicators methodology and analytical issues (World Bank Policy Research No. 5430). Washington, DC: The World Bank.
27.
LiS.SamsellD. P. (2009). Why some countries trade more than others: The effect of the governance environment on trade flows. Corporate Governance: An International Review, 17(1), 103–117.
28.
Martinez-ZarzosoI.Nowak-LehmannF.RehwaldK. (2017). Is aid for trade effective? A panel quantile regression approach. Review of Development Economics, 21(4), e175–e203.
29.
MartuscelliA.WintersL. (2014). Trade liberalisation and poverty: What have we learned in a decade? London: CEPRI. Retrieved from http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9947
30.
MorrisonK. (1976). Manufactured exports and protection in developing countries: A cross-country analysis. Economic Development and Cultural Change, 25(1), 151–158.
31.
NickellS. (1981). Biases in dynamic models with fixed effects. Econometrica, 49(6), 1417–1426.
32.
OECD/WTO. (2017). Aid for trade at a glance 2017: Promoting trade, inclusiveness and connectivity for sustainable development. In Financing connectivity: Aid for trade priorities, policies, and programmes (Chapter 11). Geneva and Paris: WTO and Organisation for Economic Cooperation and Development. Retrieved from http://dx.doi.org/10.1787/aid_glance-2017-en
33.
Pacheco-LópezP. (2005). The effect of trade liberalization on exports, imports, the balance of trade, and growth: The case of Mexico. Journal of Post Keynesian Economics, 27(4), 595–619.
34.
PapageorgiouD.MichaelyM.ChokskyA. (1991). Liberalizing foreign trade. Oxford and Cambridge: Blackwell.
35.
RatnaikeY. C. (2012). Is there an empirical link between trade liberalisation and export performance? Economics Letters, 117(1), 375–378.
36.
RoodmanD. M. (2009). A note on the theme of too many instruments. Oxford Bulletin of Economic and Statistics, 71(1), 135–158.
37.
Santos-PaulinoA. U. (2002). Trade liberalisation and export performance in selected developing countries. Journal of Development Studies, 39(1), 140–164.
38.
Santos-PaulinoA. U. (2006). Trade liberalisation and trade performance in the Dominican Republic. Journal of International Development, 18(7), 925–944.
39.
Santos-PaulinoA. U. (2007). Aid and trade sustainability under liberalisation in least developed countries. The World Economy, 30(6), 972–998.
40.
Santos-PaulinoA.ThirlwallA. (2004). The impact of trade liberalisation on exports, imports and the balance of payments of developing countries. The Economic Journal, 114(493), F50–F72.
41.
ShafaedinS. M. (1994). The impact of trade liberalisation on exports and GDP in least developed countries (UNCTAD Discussion Paper No. 85). Geneva: UNCTAD.
42.
VeldeTeD.W.RazzaqueM.A. (2013). Future directions of aid for trade. In Assessing aid for trade: Effectiveness, current issues and future directions (pp. 1–13). London: Commonwealth Secretariat, ODI.
43.
VijilM.WagnerL. (2012). Does aid for trade enhance export performance? Investigating on the infrastructure channel. World Economy, 35(7), 838–868.
44.
WangZ.XuM. (2018). Aid for trade and the quality of exports. Applied Economics Letters, 25(10), 668–673.
45.
WuJ.LiS.SamsellD. (2012). Why some countries trade more, some trade less, some trade almost nothing: The effect of governance environment on trade flows. International Business Review, 21(2), 225–238.
46.
ZakariaM. (2014). Effects of trade liberalization on exports, imports, and trade balance in Pakistan: A time series analysis. Prague Economic Papers, 23(1), 121–139. doi:10.18267/j.pep.476
