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The paper identifies the impact of physical barriers to trade within Central America through the use of an augmented and partially constrained Gravity Model of Trade. Adjusting the Euclidian distance factor for Central America by real average transport times, the model quantifies the impact of poor connectivity and border frictions on the region's internal trade as well as its trade with external partners, such as the United States and Europe. In addition, the authors benchmark Central America's trade coefficients against those of a physically integrated region by running a parallel Gravity Model for the 15 core countries of the European Union. This allows for the estimation of potential intra-regional and external trade levels if Central America were to reduce border frictions and time of travel between countries and thus benefit from both the adjacency of each country's neighbors and the gravitational pull of the region's economies. The analysis is conducted for all of Central America's trade and is also disaggregated for three groups of products-processed fruits and vegetables; steel and steel products; and grains-by both volume and value. This differentiation tests the consistency of the results while providing insight into the differentiation in trading patterns and potential for these containerized, break-bulk, and bulk products. The results of the model include a potential doubling in intraregional exports if Central America could achieve the adjacency and time-distance factors of a truly integrated region. In addition, the region's combined exports to the European Union and the United States are projected to increase by more than a third compared with the current level, assuming European Union-level adjacency performance. Even more external trade benefits would accrue by reducing the economic penalty imposed by overland transport and border crossing inefficiencies.

Economic growth --- Economic performance --- Economic Theory & Research --- Food & Beverage Industry --- Free Trade --- International Economics & Trade --- International Trade --- Regional trade --- Regulatory environment --- Trade Policy --- Transport Economics Policy & Planning

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This paper presents asymptotic theory and Monte-Carlo simulations comparing maximum-likelihood bivariate probit and linear instrumental variables estimators of treatment effects in models with a binary endogenous treatment and binary outcome. The three main contributions of the paper are (a) clarifying the relationship between the Average Treatment Effect obtained in the bivariate probit model and the Local Average Treatment Effect estimated through linear IV; (b) comparing the mean-square error and the actual size and power of tests based on these estimators across a wide range of parameter values relative to the existing literature; and (c) assessing the performance of misspecification tests for bivariate probit models. The authors recommend two changes to common practices: bootstrapped confidence intervals for both estimators, and a score test to check goodness of fit for the bivariate probit model.

Econometrics --- Educational Technology and Distance Education --- Growth Rates --- International Economics & Trade --- Market Integration --- Output --- Regulatory Environment --- Science Education --- Scientific Research & Science Parks --- Statistical & Mathematical Sciences

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This paper presents asymptotic theory and Monte-Carlo simulations comparing maximum-likelihood bivariate probit and linear instrumental variables estimators of treatment effects in models with a binary endogenous treatment and binary outcome. The three main contributions of the paper are (a) clarifying the relationship between the Average Treatment Effect obtained in the bivariate probit model and the Local Average Treatment Effect estimated through linear IV; (b) comparing the mean-square error and the actual size and power of tests based on these estimators across a wide range of parameter values relative to the existing literature; and (c) assessing the performance of misspecification tests for bivariate probit models. The authors recommend two changes to common practices: bootstrapped confidence intervals for both estimators, and a score test to check goodness of fit for the bivariate probit model.

Econometrics --- Educational Technology and Distance Education --- Growth Rates --- International Economics & Trade --- Market Integration --- Output --- Regulatory Environment --- Science Education --- Scientific Research & Science Parks --- Statistical & Mathematical Sciences

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The paper identifies the impact of physical barriers to trade within Central America through the use of an augmented and partially constrained Gravity Model of Trade. Adjusting the Euclidian distance factor for Central America by real average transport times, the model quantifies the impact of poor connectivity and border frictions on the region's internal trade as well as its trade with external partners, such as the United States and Europe. In addition, the authors benchmark Central America's trade coefficients against those of a physically integrated region by running a parallel Gravity Model for the 15 core countries of the European Union. This allows for the estimation of potential intra-regional and external trade levels if Central America were to reduce border frictions and time of travel between countries and thus benefit from both the adjacency of each country's neighbors and the gravitational pull of the region's economies. The analysis is conducted for all of Central America's trade and is also disaggregated for three groups of products-processed fruits and vegetables; steel and steel products; and grains-by both volume and value. This differentiation tests the consistency of the results while providing insight into the differentiation in trading patterns and potential for these containerized, break-bulk, and bulk products. The results of the model include a potential doubling in intraregional exports if Central America could achieve the adjacency and time-distance factors of a truly integrated region. In addition, the region's combined exports to the European Union and the United States are projected to increase by more than a third compared with the current level, assuming European Union-level adjacency performance. Even more external trade benefits would accrue by reducing the economic penalty imposed by overland transport and border crossing inefficiencies.

Economic growth --- Economic performance --- Economic Theory & Research --- Food & Beverage Industry --- Free Trade --- International Economics & Trade --- International Trade --- Regional trade --- Regulatory environment --- Trade Policy --- Transport Economics Policy & Planning

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The authors use panel data on the number of new firm registrations in 92 countries to study how the magnitude of reforms affects new firm registrations. They find that small reforms, in general less than 40 percent reduction in costs, days, or procedures required for business registration, do not have a significant effect on new firm creation. This suggests that small reforms do not have the intended effect on private sector development. They also find important synergies in multiple reforms of two or more business environment indicators. Finally, they show that countries with relatively weaker business environments require relatively larger reforms in order to impact new firm growth. These results can be helpful to motivate policymakers to make larger, broader reforms.

Business Environment --- Business in Development --- Business registration --- Businesses --- Competitiveness and Competition Policy --- E-Business --- Economic Development --- Enterprise Development & Reform --- Entrepreneurship --- Environment --- Environmental Economics & Policies --- Environments --- Private Sector --- Private Sector Development --- Reforms --- Regulatory environment --- Result