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Odyssey in International Markets: An Assessment of the Effectiveness of Export Promotion in Latin America and the Caribbean

Special Report prepared by the Integration and Trade Sector


Publication date: October 2010

Author/Editor: Christian Volpe Martincus

Contributors: Jerónimo Carballo (University of Maryland), Antoni Estevadeordal (IDB), Andrés Gallo (University of North Florida), Pablo M. Garcia (IDB), Jacint Jordana (Universitat Pompeu Fabra and Institut Barcelona d'Estudis Internacionals), and Jessica Luna (IDB).

Language: English

 

Abstract

Despite progress in communication technologies, lack of information still severely handicaps companies seeking to operate in international markets. Furthermore, the investments that these companies must make to gather the information required to trade with foreign markets may yield reduced returns and may consequently be low from a social point of view as third parties may derive benefits from this same information. Thus, lack of information may negatively affect trade, and thereby productivity and economic growth. For these reasons, firms carrying out export projects may require support to overcome information barriers. This is precisely the service that export promotion organizations provide. But, there is little evidence on how well these organizations perform this task. Export promotion is costly, and the resources used might be better employed elsewhere. In order to ascertain that these resources are, in fact, being well invested, it must be first determined whether the policy initiatives they finance have an impact on those variables that are supposed to affect, in this case, exports. Making this determination is the aim of this report. This study first makes a comprehensive analysis of export promotion organizations in some three dozens of countries and regions; and second, it provides robust evaluations, using state-of-the-art econometrics and original datasets purposely compiled, of the impacts that policies have had on export outcomes of countries and firms. Findings reported in this study suggest that trade promotion has been effective in facilitating export expansion, especially along the extensive margin. At the same time, the report points the need for further research to gain deeper insights into its relative merits.

Background Working Papers

  • Beyond the Average Effects: The Distributional Impacts of Export Promotion Programs in Developing Countries
  • Abstract: Do all exporters benefit the same from export promotion programs? Surprisingly, not matter how obvious this question may a priori be when thinking of the effectiveness of these programs there is virtually no empirical evidence on how they affect export performance in different parts of the distribution of export outcomes. This paper aims at filling this gap in the literature. We assess the distributional impacts of trade promotion activities performing efficient semiparametric quantile treatment effect estimation on assistance, total sales, and highly disaggregated export data for the whole population of Chilean exporters over the period 2002-2006. We find that these activities have indeed heterogeneous effects over the distribution of export performance, along both the extensive and intensive margins. In particular, smaller firms as measured by their total exports seem to benefit more from export promotion actions. Click here to download.

  • Entering New Country and Product Markets: Does Export Promotion Help?
  • Abstract: Entering new export markets is primarily a discrete choice. Even though several empirical papers have used modeling strategies consistent with this fact, no study has examined the effects of public policies aimed at affecting this decision within this setting. In this paper we assess the impact of trade promotion activities on export outcomes using trade support and highly disaggregated export data for the whole population of exporters of a small developing country, Uruguay, over the period 2000-2007 to estimate a binary outcome model which allows for unobserved heterogeneity. We find that trade supporting activities have helped firms reach new destination countries and introduce new differentiated products. Click here to download.

  • Export Promotion: Heterogeneous Programs and Heterogeneous Effects
  • Abstract: Export promotion agencies provide exporters with a broad range of services, going from counseling to sponsoring their participation in international trade missions and fairs. These services may have heterogeneous effects and thus contribute differently to achieve the goals of these organizations. Empirical evidence on their relative effectiveness is rather limited. This paper aims at filling this gap in the literature. We compare the impact of different public trade promotion programs on the extensive and intensive margin of firms’ exports, both to each other and with respect to no participation in these activities, by applying multiple treatment matching differencein- differences on highly disaggregated export data for the whole population of Colombian exporters over the period 2003-2006. We find that the use of programs combining different services is associated with better export performance, primarily along the country-extensive margin, than their basic individual components. Click here to download.

  • Export Promotion Activities in Developing Countries: What Kind of Trade Do They Promote?
  • Abstract: Information problems involved in trading differentiated goods are a priori acuter than those associated with trading more homogeneous products. The impact of export promotion activities intending to address these problems can be therefore expected to differ across goods with different degree of differentiation. Empirical evidence on this respect is virtually inexistent. This paper aims at filling this gap in the literature by providing estimates of the effect of these activities over firms trading different goods using highly disaggregated export data for the whole population of Costa Rican exporters over the period 2001-2006. We find that trade promotion actions favor an increase of exports along the extensive margin, in particular, in terms of destination countries, in the case of firms that are already selling differentiated goods. However, these actions do not seem to encourage exporter to start exporting these goods. Further, no significant impacts are observed for firms exporting reference-priced and homogeneous goods. Click here to download.

  • Export Promotion Organizations in Latin America and the Caribbean: An Institutional Portrait
  • Abstract: Virtually all Latin American and Caribbean countries have established specialized organizations to promote their exports. Existing analyses of these organizations are at best partial and fragmentary. This paper aims at overcoming these limitations of the literature by presenting a consistent, detailed organizational characterization of the major export promotion entities in their respective countries. This characterization is primarily based on data collected through an extensive survey that we have conducted among organizations in the region, and, to put them into an appropriate perspective, among relevant organizations from countries outside of the region. Moreover, for a few countries, we have carried out in-depth case studies not only to report more precise information on those aspects covered by the survey, such as the number and diversity of other actors, both public and private, engaged in export promotion along with their interaction patterns, but also to examine additional factors that are likely to be helpful in understanding the current organizational configuration of the aforementioned entities and their potential effectiveness, such as the historical institutional process leading to their creation. Click here to download.

  • Information Barriers, Export Promotion Institutions, and the Extensive Margin of Trade
  • Abstract: This paper assesses role played by export promotion institutions in shaping the extensive margin of Latin American and Caribbean countries’ exports over the period 1995-2004. We find that the presence of offices of export promotion agencies abroad favors an increase in the number of differentiated goods that are exported, whereas a larger number of diplomatic representations in the importer countries seem to be associated with exports of a larger number of homogeneous goods. Click here to download.

  • Is Export Promotion Effective in Developing Countries? Firm-Level Evidence on the Intensive and the Extensive Margins of Exports
  • Abstract: How effective are export promotion activities in developing countries? What are the channels through which export promotion affects firms’ exports, the intensive margin or the extensive margin? Empirical evidence in this respect is scarce. We aim at filling this gap in the literature by providing evidence on the impact of export promotion on export performance using a unique firm-level dataset for Peru over the period 2001-2005. We find that export promotion actions are associated with increased exports, primarily along the extensive margin, both in terms of markets and products. This result is robust across alternative specifications and estimation methods. Click here to download.

  • Public Programs to Promote Firms’ Export in Developing Countries: Are There Heterogeneous Effects by Size Categories?
  • Abstract: Several countries have implemented programs to support their firms’ internationalization efforts. Their impacts are likely to be heterogeneous over firm size categories because these programs are primarily intended and expected to benefit smaller companies. Whether this is or not the case is still an open question. In this paper we aim at filling this gap in the literature by providing evidence on the effects of trade promotion programs on the export performance of firms within different size segments using a rich firm-level dataset for Argentina over the period 2002-2006. We find that these effects are indeed larger for smaller firms. Click here to download.

  • The Impact of Export Promotion Institutions on Trade: Is It the Intensive or the Extensive Margin?
  • Abstract: This paper provides evidence on the channels through which export promotion institutions affect bilateral trade using a sample of Latin American and Caribbean countries over the period 1995-2004. We find that these institutions have a larger impact on the extensive margin of exports, especially in the case of trade promotion organizations. Click here to download.

Events and Presentations

Press

Related Conferences and Capacity Building Initiatives

Related Research Projects

  • Policies and Institutions for Productivity in Latin America and the Caribbean
  • This study will produce entirely new evidence on how innovation and export promotion policies feed back into each other at the firm-level, thereby potentially affecting productivity. This research project will help policymakers make their decisions by identifying the main transmission mechanisms through which these policies interact (e.g., whether they operate through product or process innovation, whether they operate through an increased volume of exports or through larger diversification). In terms of information, this research will build on the efforts already carried out by SCT and INT teams to integrate registered data on program beneficiaries over several years. Multi-treatment impact evaluation methods will be used.

    Component’s Team Members:
    Volpe Martincus, Christian (Team Leader) (christianv@iadb.org)
    Crespi, Gustavo Atilio (gcrespi@iadb.org)
    Maffioli, Alessandro (alessandrom@iadb.org)

IDB Operational Support to Countries’ Export Promotion Activities

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