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This paper shows that the institutional environment and the ability to export on time are sources of comparative advantage as important as factors of production. In particular, the ability to export on time is crucial to explain comparative advantage in intermediate goods. These findings underscore the importance of investing in infrastructure and fostering trade facilitation to boost a country's participation in production networks. Furthermore, the paper contributes to the so-called "distance puzzle" by showing that the increasing importance of distance over time is in part driven by trade in intermediate goods.

Bilateral Trade --- Capital Goods --- Comparative Advantage --- Economic Theory & Research --- End Use --- Environment --- Environmental Economics & Policies --- Exports --- Factors of Production --- Final Goods --- Free Trade --- Intermediate Goods --- International Economics and Trade --- Macroeconomics and Economic Growth --- Quality of Transport --- Trade Facilitation --- Trade Policy --- Transport --- Transport Economics Policy & Planning

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This paper examines how aid-for-trade programs can help to magnify the growth benefits that developing countries can reap from trade reform and global integration, with a special emphasis on the Caribbean region. The first part discusses various rationales for trade-related aid, viewed both as a compensatory scheme (aimed at cushioning the impact of revenue cuts and adjustment costs) and a promotion scheme (aimed at alleviating supply-side constraints). In the latter case, particular attention is paid to the role of infrastructure as a constraining factor on trade expansion. The second part discusses the relevance of aid-for-trade arguments for Caribbean countries and identifies a number of specific issues for the region. The third part illustrates the potential growth effects of aid-for-trade programs with simulation results for the Dominican Republic - a country where infrastructure indicators remain relatively weak. The results illustrate the potentially large growth benefits that a temporary and well-targeted aid-for-trade program can provide to countries of the region.

Balance of payments --- Capital formation --- Debt --- Debt Markets --- Distorted incentives --- Domestic products --- Economic growth --- Economic Theory & Research --- Emerging Markets --- Empirical evidence --- Environment --- Environmental Economics & Policies --- Expenditures --- Externalities --- Finance and Financial Sector Development --- Free Trade --- Intermediate goods --- International Economics and Trade --- Labor force --- Labor markets --- Macroeconomics and Economic Growth --- Private Sector Development --- Production costs --- Property rights --- Public goods --- Quotas --- Tax revenue --- Trade taxes --- Unemployment --- Welfare gains