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Online Technical Appendix to “The Reorganization of Global Value Chains: Whats in it for Latin America and the Caribbean?” It describes in more detail the data sources, the empirical strategy; and presents a series of robustness checks.

This document is an appendix to the Discussion Paper entitled “Digital Technologies and Globalization: A Survey of Research and Policy Applications”. It consists of a list of specific studies that examine how digital technologies are reshaping the incentives for and patterns of international trade, investment, and policymaking, including relevant information on the main variables, sample periods, and sources.

In recent years, the world has witnessed the rise of multiple specific digital technologies, including online trade platforms, robotics, artificial intelligence (AI), 3D printing, cloud computing, blockchain, and financial technology (fintech). These digital technologies are fundamentally transforming the ways that firms and individualsas both workers and consumerscommunicate, search, trade, and invest. They are also substantially changing how governments design and implement trade and investment policies and programs and, in so doing, how they interact with firms, individuals, and each other. This paper reviews the growing empirical literature on the trade, investment, and broader development effects of the adoption of specific digital technologies. It also describes the policy applications of these technologies and discusses the incipient empirical literature on the impacts thereof. Based on this review, it identifies several open questions and avenues of future research that may be useful for deepening our understanding of digital technologies and their policy implications.

Firms seeking to invest abroad must still confront important information barriers. As a consequence, a given country may provide suitable conditions for investment but remain invisible to multinational firms. Nearly all countries in the world have established investment promotion agencies (IPAs) to address these information barriers and put themselves on investors maps. Although IPAs are ubiquitous, the existing literature on the impacts of their activities is limited and only provides a view from the top, thus leaving governments without crucial inputs for designing and guiding their policy actions. Making the Invisible Visible fills in these knowledge gaps by zooming in on the effects of investment promotion policies and the mechanisms and channels thereof. To do so, it draws on the results of a highly detailed institutional survey of more than 50 IPAs and unique firm-level data on both the worldwide location of multinational firms foreign affiliates and IPA assistance for several LAC countries. Based on the results of impact evaluations using this novel micro data, the report presents robust new evidence on whether and how investment promotion works, what works in investment promotion, and when investment promotion works. In particular, it concludes that: (i) investment promotion has been (cost-)effective in attracting multinational firms and increasing LAC countries participation in multinational production; (ii) how IPAs are organized, what they do, and how they do it all influence these effects; (iii) the impact of IPA assistance has been greater when it consisted of specialized information services and was given to firms headquartered in countries and operating in sectors in which information barriers are more prominent. These findings can help countries in the region make better, more informed policy and operational decisions to take advantage of the opportunities that the current global context could create. They may thereby create a solid basis for long-term growth and sustainable development.

Free trade or preferential trade areas (PTAs) allow importers who belong to the area to export to each other while paying zero or preferential tariffs as long as Rules of Origin (ROOs) are met. Meeting them is costly not only in terms of production costs but also in terms of documentation costs. We ask if these fixed costs of documentation change over time with the experience of the firm in obtaining preferential tariffs. We explore this using a unique importer-exporter matched transaction-level customs data set on a group of Latin American countries. Our estimating equation is model-based and shows that these fixed costs depend on the history of preference utilization. Most of the effect comes from experience in the same product and same partner, with some spillover to other partners buying the same product. There is little learning from experience in other products and other partners. When considering products that have been under preferences for a while, some learning might have occurred prior to the start of our data. Using a natural experiment in Argentina, where some products were newly brought under preferences, we show that learning is indeed larger for such products. As facilitating preference use today also makes it easier to use preferences in the future, interventions early on in the life of the FTA to reduce such costs would be more effective.

In this paper, we estimate the trade effects of a transit system upgrading that streamlines border processing in developing countries. Our empirical approach combines transaction level export data from El Salvador with unique data that distinguishes export flows that were processed on the transit system. Our results indicate that the new transit system lowered regulatory border costs and raised exports. At the low end, our back-of-the-envelope estimate of the return to investment is US$ 3-to-1. The estimation results also suggest that existing frameworks that emphasize shipping frequency and the formation of new trade relationships are important to interpret trade facilitation policy. This evidence informs an important policy covered by the 2013 WTO Agreement of Trade Facilitation.

International trade is subject to information incompleteness. Firms must therefore engage in a costly search process to find business partners. Online platforms can reduce these search costs and thereby favor firms exports. We examine whether this is actually the case and the underlying mechanisms thereof by focusing on ConnectAmericas, a free, purely informational online platform that, by the end of 2018, connected more than 45,000 firms from 140 countries. In particular, we estimate the impact of using the platform on firms foreign sales utilizing detailed data on both firms participation therein and the entire universe of export transactions for Peru over the period 2010-2018. In so doing, we apply a difference-in-differences strategy and specifically exploit visits firms received to their profiles as a source of identifying variation. Consistent with the interpretation of the platform as a search cost-reducing mechanism, our estimates suggest that ConnectAmericas resulted in increased firms exports, particularly from those that had no digital presence, of differentiated products, and to less familiar destinations.

Trade facilitation policies intend to simplify administrative processes and accelerate the handling of shipments across borders. Recent research shows that these policies have substantial effects on trade flows. In this chapter, we discuss what the existing evidence for trade implies for the provision of transportation services. In addition, we make use of a particular policy change, an upgrade to a new transit trade regime, to illustrate the many direct and indirect linkages between trade facilitation and transportation. These multiple connections imply that a well-functioning transportation sector is important to realize the full potential of trade facilitation policies. Our conceptual and empirical analyses show that, despite an increase in demand for transportation services, the effect of trade facilitation on freight rates and the underlying transportation sector is far from obvious. This calls for future research to examine equilibrium adjustment channels to trade facilitation policies in the transportation sector.

Domestic road programs are often justified on the basis of their presumed positive effects on firms' exports and accordingly on firms' employment. In this paper we evaluate this policy claim for Peru, a developing country whose regions were exposed to an asymmetric infrastructure shock. In so doing, we take advantage of detailed geo-referenced data on firm-level trade for the period 2003–2010 as well as on recent and historical road infrastructure. In particular, to identify the impacts of interest, we first exploit the dimensions of this dataset to account for regional-sectoral and even firm-level confounding factors through extensive sets of fixed effects. In addition, we conduct placebo exercises and carry out instrumental variable estimations whereby we instrument recent changes in the road network with the pre-Columbian Inca road network. Estimates concur in suggesting that improvements in transport infrastructure had a significant positive impact on firms' exports and thereby on firms' job growth.

Multinational production has become increasingly important in recent decades. Countries resort to different industrial policies to influence the geography of this production. In this paper, we focus on a ubiquitous “soft” industrial policy that aims at reducing information barriers - investment promotion. We present evidence on the impact of this policy on multinational firms location decisions using -for the first time to our knowledge- firm-level data. To do so, we carry out difference-in-differences and instrumental variables estimations on data on the establishment and location of affiliates of multinational firms and assistance by the investment promotion agency (IPA) in Costa Rica over the period 2000-2016. Estimates suggest that investment promotion has been effective: support from the IPA is associated with an increase of 11 percentage points in the probability that a multinational firm establishes its first affiliate in the country. This effect is stronger on firms from countries facing more severe information frictions.

Esta publicacion sintetiza el trabajo analitico desarrollado por especialistas del BID en el marco de preparacion de la nueva estrategia del Banco con Paraguay. El documento analiza los desafios que afronta Paraguay para alcanzar mayores niveles de bienestar y desarrollo, y propone opciones de politica para superarlos.

In this article we present evidence on the impact of economic integration agreements (EIAs) on production fragmentation based on a direct measure of offshoring: the number of vertically integrated foreign subsidiaries located in partner countries. We find that EIAs favour the formation of cross-border production networks. Further, this effect is stronger when agreements are deeper.

In this paper we provide estimates of the effects of international transport costs on firms’ exports and disentangle the channels of these effects. In so doing, we use a unique dataset consisting of highly disaggregated transaction-level trade and transport cost data and, in order to account for endogeneity, we exploit the exogenous variation in these costs associated with the non-trade related closure of the main bridge connecting two countries.

Real borders can be thick. They are not dimensionless lines as typically assumed in theoretical models and standard empirical analyses, but a zone populated by agencies that develop and administer regulations firms have to comply with when engaging in international trade, many of which have their own procedures. Borders can then easily become a labyrinth hard to get through. This is crucial because border agencies' procedures influence the time needed to ship goods from their origins to their destinations and can thereby affect trade, particularly in a context characterized by increasingly segmented production chains and rising lean retailing. Latin American and Caribbean countries have recently implemented various trade facilitation initiatives that aim to streamline the administrative processing of trade flows and accordingly reduce trading times. These initiatives include risk management, single windows, authorized economic operators, simplified postal exports, and expedited transit arrangements, all of which are cornerstones of the 2013 WTO Agreement on Trade Facilitation and have been subject of multiple international organizations' operations. Despite of being ubiquitous, evidence on the impact of these specific initiatives has been extremely limited. Lack of precise data has been a major obstacle. Out of the Border Labyrinth fills this gap and sheds entirely new light on the trade effects of such trade facilitation measures and the channels thereof. It presents the results of thorough impact evaluations, which have been carried out by applying rigorous methods on unprecedented transaction-level data for several countries in the region. These results reveal that trade actually expanded as a consequence of such facilitation measures and that the primary channel has been shipping frequency. Based on these econometric examinations and careful institutional case studies, Out of the Border Labyrinth systematizes a new line of trade policy research and informs policymaking and assistance activities by international organizations by providing tools that will help design and assess policies in an area that will be very active in upcoming years as countries work towards implementing the multilateral agreement reached in Bali.

We examine transaction-level Peruvian import data to show that firms are subject to significant costs of port-of-entry delays. At the transaction level, we observe the time it takes a shipment to clear each step in the entry process. Our theory shows conditions under which observed entry times are endogenous. As a result, total entry delays potentially lead to biased policy conclusions and non-informative efficiency rankings of countries' entry procedures. We make three empirical contributions that help unbundle sources for time costs in trade and border effects. First, we provide evidence that at least part of the total port-entry-time is endogenous. Second, we identify the effect of entry delays on imports based on exogenous necessary entry processing. Third, we provide evidence that trade costs due to entry delays are heterogeneous across firm types. New and large importers are more elastic with respect to entry delays. This information allows researchers and policymakers to interpret aggregate port of entry delay data and their costs across different types of firms.

Firms selling products abroad usually have to interact with several border agencies that develop multiple trade regulations and oversee their compliance. These regulations establish the procedures that these firms have to follow and the documents that they have to obtain, fill in, and submit for their exports to be authorized. In this paper, we estimate the effects of introducing information technologies as a new means to complete such traderelated procedures. In particular, we use highly disaggregated firm-level export data from Costa Rica over the period 2007-2013 and exploit the gradual phase-in of an electronic trade single window scheme across groups of products and ports. Results suggest that this new system has been associated with both an expansion in the number of exporting firms and increased firms' exports along the shipment extensive margin and the buyer extensive and intensive margins.

In this paper, we examine an innovative postal export regime that involves both a streamlining of export procedures and provision of intermediation services to investigate how firms' react to changing trade costs and whether and how these firms learn. In so doing, we use a unique dataset that consists of the entire universe of Peru's export transactions over the period 1999-2014 including both regular shipments and postal shipments. We find that the new export mode has been associated with increased and more diversified regional exports, higher entry and exit rates, more export experimentation, and learning both within and across firms.

Security concerns in a context of increasingly segmented supply chains have led to stricter border control measures, which may potentially negatively affect international trade. Customs around the world have therefore implemented security-motivated certification programs to facilitate licit trade. These programs offer trustworthy trading firms, i.e., Authorized Economic Operators (AEOs), several advantages in the administrative processing of their shipments including less frequent physical inspections and expedited customs clearance. In this study we focus on Mexico's AEO Program NEEC. In particular, we evaluate the impact of this program by primarily carrying out differences-in-differences estimations on highly disaggregated firm-level data that cover the entire universe of export and import transactions of the country over the period 2009-2014. Estimation results suggest that NEEC has been associated with less physical inspections and shorter clearance times and has thereby favored increased firms' exports. Effects seem to be stronger on the frequency of shipments and on consumer goods, industrial inputs, and capital goods.

Information problems involved in trading differentiated goods are a priori acuter than those associated with trading more homogeneous products. The impact of export promotion activities intending to address these problems can be therefore expected to differ across goods with different degree of differentiation. Empirical evidence on this respect is virtually inexistent. This paper aims at filling this gap in the literature by providing estimates of the effect of these activities over firms trading different goods using highly disaggregated export data for the whole population of Costa Rican exporters over the period 2001-2006. We find that trade promotion actions favor an increase of exports along the extensive margin, in particular, in terms of destination countries, in the case of firms that are already selling differentiated goods. However, these actions do not seem to encourage exporter to start exporting these goods. Further, no significant impacts are observed for firms exporting reference-priced and homogeneous goods.

Several countries have implemented programmes to support their firms’ internationalization efforts. Their impacts are likely to be heterogeneous over firm size categories because these programmes are primarily intended and expected to benefit smaller companies. Whether this is or not the case is still an open question. In this article, we aim at filling this gap in the literature by providing evidence on the effects of trade promotion programmes on the export performance of firms within different size segments using a rich firm level dataset for Argentina over the period 2002 to 2006. We find that these effects are indeed larger for smaller firms.

Export promotion agencies provide exporters with a broad range of services, going from counselling to sponsoring their participation in international trade missions and fairs. These services may have heterogeneous effects and thus contribute differently to achieve the goals of these organisations. Empirical evidence on their relative effectiveness is rather limited. This paper aims at filling this gap in the literature. We compare the impact of different public trade promotion programmes on the extensive and intensive margin of firms’ exports, both to each other and with respect to no participation in these activities, by applying multiple treatment matching difference-in-differences on highly disaggregated export data for the whole population of Colombian exporters over the period 2003–06. We find that use of programmes that combine different services is associated with better export performance than their basic individual components, primarily along the country-extensive margin.

Does standard adoption help firms in developing countries overcome information barriers and thereby perform better in international markets? What are the channels through which certification affects firms' exports, the intensive margin, or the extensive margin? We provide evidence on the impact of certification on export performance using a unique firm-level dataset for Argentina over the period 1998–2006. We find that ISO certification is associated with increased exports, along the extensive margin—primarily in terms of destination countries—and the intensive margin.

article i nfo Do all exporters benefit the same from export promotion programs? Surprisingly, no matter how obvious this question may a priori be when thinking of the effectiveness of these programs, there is virtually no empirical evidence on how they affect export performance in different parts of the distribution of export outcomes. This paper aims at filling this gap in the literature. We assess the distributional impacts of trade promotion activities performing efficient semiparametric quantile treatment effect estimation on assistance, total sales, and highly disaggregated export data for the whole population of Chilean exporters over the 2002-2006 period. We find that these activities have indeed heterogeneous effects over the distribution of export performance, along both the extensive and intensive margins. In particular, smaller firms as measured by their total exports seem to benefit more from export promotion actions. © 2009 Elsevier B.V. All rights reserved.

Sectoral concentration of exports has been a longstanding matter of concern for policymakers in developing countries. According to economic theory and recent empirical evidence, improved market access through trade agreements is likely to favor export diversification. In this article, it is assessed whether this has been the case for Colombian exports to the United States and whether an FTA with the United States would help Colombia diversify their exports. We find that lower tariffs have indeed favored exports of new products from Colombia. Predictions suggest that the FTA is likely to induce further diversification, but only up to a certain point.

Preferential trade agreements lead to a reallocation of resources across sectors and countries. Production patterns resulting from North-North regional integration initiatives have been documented in several studies. However, empirical evidence on South-South arrangements is rather limited. In this respect, MERCOSUR provides an interesting case study. This paper aims at answering one main question: To what extent has the establishment of MERCOSUR affected industrial development across member countries? Using data for Argentina, Brazil, and Uruguay over the period 1985-1998, we find that preferential trade liberalization has favored a reshaping of manufacturing production according to regional comparative advantage in labor and skilled labor. Furthermore, declining internal tariffs have weakened agglomeration forces determined by the distribution of market sizes. By using GMM estimation techniques, we ensure that these results are robust to endogeneity and serial correlation problems.

Does trade policy shape a country's internal economic geography? Empirical evidence on the spatial effects of trade policy in developing countries is limited. This paper contributes to this literature by looking at the experience of Brazil over the 1990s. In particular, an econometric analysis of the determinants of industrial location using data on regional manufacturing employment as well as data on several region and industry characteristics over the period 1990–1998 is performed. Estimation results suggest that trade openness favored location in states closer to the largest neighbor trading partner and that this effect increased through the end of the 1990s.

This paper examines the impact of trade policy on specialization patterns in ten Latin American countries over the period 1985–1998. These countries are natural case studies because in the last decades they implemented comprehensive trade liberalization programs, both generally and preferentially, starting from relatively high tariff protection levels. Our econometric results suggest that reducing own most favored nation tariffs is associated with increasing manufacturing production specialization. Furthermore, we find that preferential trade liberalization and differences in the degree of unilateral openness have resulted in increased dissimilarities in manufacturing production structures across countries. These results are robust across specialization measures and estimation methods.

Strong concentration of population and economic activity in a few metropolitan areas is a pervasive feature in several developing countries. Theoretical analyses within the so-called new economic geography have suggested that this phenomenon can be related to trade policies. However, no theoretical consensus has been reached concerning the direction of this effect. Just a few empirical studies have attempted to explore this link. In this paper we exploit the cross-sectoral pattern of tariff protection to explicitly assess to what extent trade policy explains observed geographical concentration of industries in Argentina. This country is an interesting case because economic activities have been traditionally concentrated around the Great Buenos Aires area, while at the same time tariffs have been high on average and have displayed a large cross-sectoral variation over the last decades. The econometric evidence suggests that trade policy has had indeed a significant impact on manufacturing location. In particular, lower sectoral tariffs have been associated with de-concentration of industries out of the area surrounding Buenos Aires.

SUMMARY Many developing countries' exports tend to be highly concentrated in terms of sectors and even products. In particular, they are strongly specialized in self-contained sectors. Recent economic literature has shown that institutions contribute to explaining this pattern. In this paper, we argue that the degree of self-containment itself is endogenous to institutions. Ceteris paribus a given sector will therefore have different levels of interactions with the rest of the economy across countries depending on the quality of institutions. We provide supportive evidence using a simultaneous equation approach on data on sectoral trade, country-specific input-output linkages, and institutional strength.

How effective are export promotion activities in developing countries? What are the channels through which export promotion affects firms' exports, the intensive margin or the extensive margin? Empirical evidence in this respect is scarce. We aim at filling this gap in the literature by providing evidence on the impact of export promotion on export performance using a unique firm-level dataset for Peru over the period 2001–2005. We find that export promotion actions are associated with increased exports, primarily along the extensive margin, both in terms of markets and products. This result is robust across alternative specifications and estimation methods.