Endogenous Export Costs and the Role of Transaction Barriers in International Trade

Abstract

With the virtual disappearance of tariffs, domestic export time delays have emerged as a major obstacle to trade. This explains recent WTO initiatives to combat such delays that have resulted in important reductions in forty percent of developing countries. We propose a novel mechanism by which reductions in delays induce governments to increase the export fees they charge exporters, and test this prediction empirically. Our results support this form of endogenous export fees. They also show that for exporters of low-value and time-insensitive goods, such as many developing countries, export fees are as significant an impediment to exports as delays.