The Role of Trade Facilitation in Central Asia: A Gravity Model

Levy Economics Institute of Bard College Working Paper No. 628

42 Pages Posted: 4 Nov 2010

See all articles by Jesus Felipe

Jesus Felipe

Asian Development Bank

Utsav Kumar

Asian Development Bank

Date Written: October 3, 2010

Abstract

With a decrease in formal trade barriers, trade facilitation has come into prominence as a policy tool for promoting trade. In this paper, we use a gravity model to examine the relationship between bilateral trade flows and trade facilitation. We also estimate the gains in trade derived from improvements in trade facilitation for the Central Asian countries. Trade facilitation is measured through the World Bank’s Logistic Performance Index (LPI). Our results show that there are significant gains in trade as a result of improving trade facilitation in these countries. These gains in trade vary from 28 percent in the case of Azerbaijan to as much as 63 percent in the case of Tajikistan. Furthermore, intraregional trade increases by 100 percent. Among the different components of LPI, we find that the greatest increase in total trade comes from improvement in infrastructure, followed by logistics and efficiency of customs and other border agencies. Also, our results show that the increase in bilateral trade, due to an improvement in the exporting country’s LPI, in highly sophisticated, more differentiated, and high-technology products is greater than the increase in trade in less sophisticated, less differentiated, and low technology products. This is particularly important for the Central Asian countries as they try to reduce their dependence on exports of natural resources and diversify their manufacturing base by shifting to more sophisticated goods. As they look for markets beyond their borders, trade facilitation will have an important role to play.

Keywords: Central Asia, Gravity Model, Trade Facilitation

JEL Classification: F10, F15, F17

Suggested Citation

Felipe, Jesus and Kumar, Utsav, The Role of Trade Facilitation in Central Asia: A Gravity Model (October 3, 2010). Levy Economics Institute of Bard College Working Paper No. 628. Available at SSRN: https://ssrn.com/abstract=1702367 or http://dx.doi.org/10.2139/ssrn.1702367

Jesus Felipe (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Utsav Kumar

Asian Development Bank ( email )

6 ADB Avenue
Central and West Asia Department
Mandaluyong City
Philippines

HOME PAGE: http://works.bepress.com/kumarutsav/

Register to save articles to
your library

Register

Paper statistics

Downloads
300
rank
98,902
Abstract Views
1,217
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information