DP8451 Need for Speed: Is Faster Trade in the EU Trade-creating?

Author(s): Cecília Hornok
Publication Date: June 2011
Keyword(s): difference-in-difference-in-differences estimation, EU enlargement, time cost of trade, transport mode choice, treatment intensity
JEL(s): F13, F14, F15
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8451

Timeliness has gained growing importance in international trade. This paper provides empirical evidence on the significant cost of time in trade by exploiting the quasi-experimental nature of the European Union (EU) enlargement in 2004. It applies a difference-in-difference-in-differences econometric strategy on a European industry-level database of bilateral trade barriers, where industries are differentiated according to their time sensitivity. The use of a treatment intensity indicator that captures the decline in the waiting time at borders supports the identication. Results are cross-checked on subsamples defined along transport mode choice probabilities, where intra-EU transport mode choice projections are obtained from an estimated discrete choice model on extra-EU trade. Robustness checks experiment with alternative definitions of treatment sensitivity and treatment intensity.