Need for Speed: Is Faster Trade in the EU Trade-Creating?
wiiw Working Paper No. 75, April 2011
38 pages including 20 Tables and 6 Figures
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 identification. 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.
Keywords: time cost of trade, difference-in-difference-in-differences estimation, treatment intensity, EU enlargement, transport mode choice
JEL classification: F13, F14, F15
Countries covered: European Union
Research Areas: International Trade, Competitiveness and FDI