Introduction Methodology Results Robustness Conclusion
Import Uncertainty and Export Dynamics
Mariana Vijil1 Laurent Wagner2 Martha T. Woldemichael3
1World Bank
2FERDI
3IMF
7th IMF-WB-WTO Trade Conference
June 25, 2019
Introduction Methodology Results Robustness Conclusion
Outline
1 Introduction
2 MethodologyDataEconometric Model
3 ResultsBaseline ResultsHeterogeneity
4 RobustnessMeasurementOmitted Variables
5 Conclusion
Introduction Methodology Results Robustness Conclusion
Outline
1 Introduction
2 MethodologyDataEconometric Model
3 ResultsBaseline ResultsHeterogeneity
4 RobustnessMeasurementOmitted Variables
5 Conclusion
Introduction Methodology Results Robustness Conclusion
Motivation
Timeliness and supply chain reliability matter in a world ofGVCs:
I Most exporting firms need to import intermediate goods.I Unexpected delays in the provision of foreign inputs disrupt
production ⇒ missed delivery deadlines, reputational costs.
How does uncertainty in the time to clear imported inputsat the border affect manufacturing firms’ exportperformance?
I Do unpredictable import clearance times prevent firms fromentering new export markets?
I Do they undermine the export survival of firms alreadyoperating in foreign markets?
Introduction Methodology Results Robustness Conclusion
Related Literature
Negative effects of border clearance times on trade:I Imports: Hummels (2001), Hummels and Schaur (2013),
Clark et al. (2016).I Exports and diversification: Djankov et al. (2010), Li and
Wilson (2009), Volpe Martincus et al. (2015).
Imported inputs enhance export outcomes by boostingTFP (Amiti and Konings, 2007; Topalova and Khandewal,2011):
I Variety channel: access to a diversified range ofintermediate inputs.
I Quality channel: access to the foreign technology embodiedin imported inputs.
Introduction Methodology Results Robustness Conclusion
Related Literature (cont’d)
Imported inputs promote export performance by:
I Supporting export diversification at the intensive andextensive margins: Bas (2012), Bas and Strauss-Kahn(2014), Feng et al. (2016), Edwards et al. (2017).
I Raising export survival in foreign markets: Lopez (2006),Wagner (2012).
I Enhancing the quality of exports: Kugler and Verhoogen(2009, 2012), Manova and Zhang (2012).
Introduction Methodology Results Robustness Conclusion
Contributions
Novel measure of import uncertainty accounting for theheterogeneity in border clearance times across firms.⇒ New source of domestic trade costs.
Emphasis on the granular origins of aggregate tradeperformance.⇒ Use of firm-level information to derive country-sectorlevel indicators.
Introduction Methodology Results Robustness Conclusion
Outline
1 Introduction
2 MethodologyDataEconometric Model
3 ResultsBaseline ResultsHeterogeneity
4 RobustnessMeasurementOmitted Variables
5 Conclusion
Introduction Methodology Results Robustness Conclusion
The Import Process
Source: Authors’ elaboration.
Introduction Methodology Results Robustness Conclusion
Data
Data: Import Uncertainty
World Bank Enterprise Surveys, 2006-16.
Interquartile range of the number of days required to clearimported inputs through Customs at thecountry-sector-year level.
16,475 manufacturing firms in 5 sectorsI Food, beverage and tobaccoI Textile and leatherI WoodI Minerals, metals and chemicalsI Advanced products
Stylized facts:I 30% of manufacturing firms are direct exporters.I Among these, 74% import foreign inputs.I Exporting firms tend to be older, larger and more
productive.
Introduction Methodology Results Robustness Conclusion
Data
Data: Import Clearance Times Across Regions
Source: Authors’ elaboration based on the World Bank Enterprise Surveys.
Introduction Methodology Results Robustness Conclusion
Data
Data: Export Dynamics
Exporter Dynamics Database, 1997-2014,origin-destination-sector-year level.
Year t− 1 t t+ 1 t+ 2 t+ 3
Exportert YesEntrantt No YesExitert Yes No1st year surviving entrantt No Yes Yes2nd year surviving entrantt No Yes Yes Yes3rd year surviving entrantt No Yes Yes Yes Yes
Introduction Methodology Results Robustness Conclusion
Data
Data: Export Dynamics (cont’d)
LHS variables of interest:
I Firm entry ratet = # of entrantst / # of exporterst
I Firm exit ratet = # of exiterst / # of exporterst−1
I Entrant 1st year survival ratet = # of 1st year survivingentrantt / # of entrantst
I Entrant 2nd year survival ratet = # of 2nd year survivingentrantt / # of entrantst
I Entrant 3rd year survival ratet = # of 3rd year survivingentrantt / # of entrantst
Introduction Methodology Results Robustness Conclusion
Data
Export Dynamics: Stylized Facts
Source: Authors’ elaboration based on the World Bank Enterprise Surveys and the ExporterDynamics Database.
Introduction Methodology Results Robustness Conclusion
Econometric Model
Model
We estimate the following model by PPML:
FirmDynamicsijkt = δ0 ln(Uncertaintyikt) + δ1Xikt+∑s
δ2sWij + δ3EIAijt + δ4Tariffijkt + δ5Fit
+δ6Pjt +∑
(αiOi + βjDj + γkSk + θtTt) + εijkt
Xikt: export intensity, import penetration, experience, size,TFP.
Wij : contiguity, distance, colonial relationship dummy.
Fit and Pit: GDP per capita, cost of business start-upprocedures.
Oi, Dj , Sk and Tt: exporter-, importer-, sector- andyear-specific effects.
Introduction Methodology Results Robustness Conclusion
Outline
1 Introduction
2 MethodologyDataEconometric Model
3 ResultsBaseline ResultsHeterogeneity
4 RobustnessMeasurementOmitted Variables
5 Conclusion
Introduction Methodology Results Robustness Conclusion
Baseline Results
Baseline Results
Firm Entry Firm Exit First yr. Second yr. Third yr.Rate Rate Survival Survival Survival(1) (2) (3) (4) (5)
Log import uncertainty 0.000 0.000 -0.040*** -0.059*** -0.072**(0.006) (0.007) (0.014) (0.021) (0.036)
Log direct imports (%) -0.014 -0.004 -0.026 -0.020 0.061(0.011) (0.015) (0.031) (0.053) (0.093)
Log direct exports (% sales) -0.027*** -0.032*** 0.105*** 0.113*** 0.088(0.005) (0.013) (0.028) (0.040) (0.062)
Log experience 0.001 -0.004 0.115*** 0.157*** 0.126(0.013) (0.016) (0.035) (0.058) (0.104)
Log nb. of employees -0.020* -0.027*** 0.081*** 0.117*** 0.132**(0.010) (0.009) (0.019) (0.029) (0.057)
Log TFP 0.043* -0.045** 0.175*** 0.308*** 0.269***(0.024) (0.019) (0.039) (0.063) (0.100)
Common border -0.033 -0.040 0.065* 0.068 -0.020(0.022) (0.027) (0.039) (0.059) (0.089)
Colony -0.079* -0.019 0.148** 0.219* 0.080(0.041) (0.041) (0.073) (0.112) (0.283)
Log distance 0.110*** 0.037*** -0.071*** -0.109*** -0.150***(0.009) (0.010) (0.018) (0.029) (0.051)
Trade agreement -0.063*** -0.035** 0.098*** 0.162*** 0.194**(0.016) (0.018) (0.033) (0.051) (0.082)
Log tariffs 0.008 0.012* -0.027** -0.028* -0.030(0.005) (0.006) (0.011) (0.017) (0.027)
Log exporter GDP cap. -0.075 0.056 -0.042 -0.182 2.706*(0.097) (0.117) (0.181) (0.260) (1.640)
Log importer GDP cap. 0.061 0.004 0.122 0.136 0.264(0.041) (0.049) (0.098) (0.152) (0.229)
Log exporter entry cost (% GNI) -0.021 -0.078* -0.141* -0.327*** 0.155(0.036) (0.043) (0.084) (0.121) (0.400)
Log importer entry cost (% GNI) 0.013 -0.013 -0.011 -0.021 -0.115(0.014) (0.018) (0.035) (0.054) (0.083)
Introduction Methodology Results Robustness Conclusion
Heterogeneity
Time-Sensitivity of Buyers
Is the adverse effect of import uncertainty on survival ratesmore pronounced for exports to high-income countries?
Assumption: Buyers in developed countries are particularlysensitive to delivery schedules.
Firm Entry Firm Exit First yr. Second yr. Third yr.Rate Rate Survival Survival Survival(1) (2) (3) (4) (5)
Log import uncertainty: South-North Trade 0.009 0.011 -0.061*** -0.085*** -0.091**(0.007) (0.008) (0.016) (0.024) (0.041)
Log import uncertainty: South-South Trade -0.014 -0.022 0.020 0.029 -0.025(0.012) (0.015) (0.030) (0.000) (0.000)
High-income destination dummy = 1 0.005 0.009 -0.059*** -0.089*** -0.090**(0.007) (0.008) (0.016) (0.023) (0.040)
Introduction Methodology Results Robustness Conclusion
Heterogeneity
Time-Sensitivity of Export Industries
Are exports from time-sensitive industries more affected byimport uncertainty?
Sector-specific marginal effects of import uncertainty:
Firm Entry Firm Exit First yr. Second yr. Third yr.Rate Rate Survival Survival Survival(1) (2) (3) (4) (5)
Manufacture of food, beverage and tobacco products 0.016 0.017 -0.082*** -0.104** -0.068(0.016) (0.019) (0.028) (0.043) (0.065)
Manufacture of textile and leather-related products 0.014 0.000 0.002 -0.070* -0.134**(0.012) (0.014) (0.027) (0.042) (0.063)
Manufacture of wood-related products -0.026* 0.024 -0.025 -0.042 -0.044(0.015) (0.017) (0.034) (0.047) (0.094)
Manufacture of minerals, metals and chemicals 0.032*** 0.011 -0.053** -0.040 0.020(0.011) (0.013) (0.025) (0.037) (0.068)
Manufacture of advanced products -0.030*** -0.034*** -0.039 -0.030 -0.155*(0.009) (0.012) (0.029) (0.047) (0.086)
Introduction Methodology Results Robustness Conclusion
Heterogeneity
Sunk Costs of Entry in Foreign Markets
Do sunk costs of entry mitigate the relationship betweenimport uncertainty and export dynamics?
(a) Firm Exit Rate (b) 1st Year Survival Rate
Introduction Methodology Results Robustness Conclusion
Outline
1 Introduction
2 MethodologyDataEconometric Model
3 ResultsBaseline ResultsHeterogeneity
4 RobustnessMeasurementOmitted Variables
5 Conclusion
Introduction Methodology Results Robustness Conclusion
Measurement
Uncertainty vs. Mean/Median Time to Import
Entrant First yr. Entrant Second yr. Entrant Third yr.Survival Rate Survival Rate Survival Rate
(1) (2) (3) (4) (5) (6)
Log import uncertainty -0.044** -0.054* -0.022(0.020) (0.032) (0.062)
Log mean time to import -0.021 0.010 -0.056 -0.013 -0.080 -0.142(0.023) (0.042) (0.037) (0.069) (0.071) (0.142)
(7) (8) (9) (10) (11) (12)
Log import uncertainty -0.047*** -0.068*** -0.047(0.016) (0.025) (0.047)
Log median time to import -0.009 0.025 -0.007 0.037 -0.066 -0.073(0.020) (0.026) (0.031) (0.045) (0.059) (0.082)
(13) (14) (15) (16) (17) (18)
Log import uncertainty -0.030* -0.024 -0.079*(0.017) (0.026) (0.042)
Log export uncertainty 0.005 0.010 -0.009 -0.002 0.043 -0.005(0.014) (0.016) (0.021) (0.024) (0.040) (0.045)
Log median time to export -0.004 0.012 0.004 0.026 0.048 0.180*(0.024) (0.027) (0.035) (0.040) (0.079) (0.093)
Introduction Methodology Results Robustness Conclusion
Omitted Variables
Documents to Import and LPI
# of documents required to import ⇒ cumbersomeadministrative formalities.
Timeliness of shipments in reaching their destinationwithin the scheduled or expected delivery time.
Firm Entry Firm Exit First yr. Second yr. Third yr.Rate Rate Survival Survival Survival
(1) (2) (3) (4) (5)
Log import uncertainty -0.004 -0.003 -0.036** -0.057*** -0.072**(0.006) (0.007) (0.014) (0.021) (0.036)
Log documents to import -0.082** 0.081 0.052 0.281 -0.526**(0.041) (0.053) (0.116) (0.178) (0.238)
(6) (7) (8) (9) (10)
Log import uncertainty 0.007 0.000 -0.045*** -0.074*** -0.090**(0.006) (0.007) (0.014) (0.022) (0.038)
Log LPI timeliness 0.047 -0.145 -0.033 -0.530 2.018(0.133) (0.168) (0.319) (0.488) (1.480)
Introduction Methodology Results Robustness Conclusion
Omitted Variables
Access to Finance
% of firms required to provide collateral to obtain a loan.
% of firms that needed a loan but did not apply due tocomplex application procedures, unfavorable interest rates,high collateral requirements, insufficient maturity and loansize, and anticipation of a bank rejection.
Firm Entry Firm Exit First yr. Second yr. Third yr.Rate Rate Survival Survival Survival
(11) (12) (13) (14) (15)
Log import uncertainty -0.000 0.003 -0.041*** -0.060*** -0.079**(0.006) (0.008) (0.015) (0.022) (0.036)
Log collateral (%) -0.034** 0.016 -0.060* 0.000 -0.040(0.016) (0.016) (0.031) (0.045) (0.070)
(16) (17) (18) (19) (20)
Log import uncertainty 0.000 0.001 -0.033** -0.037 -0.080*(0.006) (0.009) (0.016) (0.026) (0.045)
Log no loan application (%) -0.003 0.002 -0.023 -0.068** -0.108**(0.008) (0.009) (0.018) (0.028) (0.051)
Introduction Methodology Results Robustness Conclusion
Omitted Variables
Corruption
% of annual sales spent in informal payments or gifts topublic officials to “get things done”.
% of firms identifying business licensing and permits as amajor or very severe obstacle ⇒ quality of firms’interaction with public officials.
Firm Entry Firm Exit First yr. Second yr. Third yr.Rate Rate Survival Survival Survival
(21) (22) (23) (24) (25)
Log import uncertainty 0.004 -0.001 -0.039*** -0.061*** -0.051(0.006) (0.008) (0.015) (0.022) (0.037)
Log bribes (% annual sales) -0.008 0.020* 0.012 0.003 -0.006(0.009) (0.012) (0.027) (0.039) (0.065)
(26) (27) (28) (29) (30)
Log import uncertainty -0.001 -0.010 -0.033* -0.045* -0.105**(0.006) (0.010) (0.017) (0.025) (0.045)
Log licensing obstacle (%) -0.006 -0.008 -0.031** -0.027 -0.073*(0.007) (0.007) (0.013) (0.019) (0.043)
Introduction Methodology Results Robustness Conclusion
Outline
1 Introduction
2 MethodologyDataEconometric Model
3 ResultsBaseline ResultsHeterogeneity
4 RobustnessMeasurementOmitted Variables
5 Conclusion
Introduction Methodology Results Robustness Conclusion
Key Takeaways
We quantify a new source of trade costs constraining thecapacity of firms to import.
Uncertainty in import clearance times impacts neither theentry nor the exit rate of manufacturing firms indeveloping countries . . .
. . . but translates into lower survival rates for newexporters, reducing the number of firms that continue toserve the foreign market beyond their first year of entry.
This effect grows larger over time as input-importingexporters bear the increasing reputational costs associatedwith missed delivery deadlines.
Introduction Methodology Results Robustness Conclusion
Key Takeaways (cont’d)
This effect is mainly driven by South-North trade, possiblyreflecting the time-sensitivity of buyers located inhigh-income countries.
The export dynamics effects of import uncertainty areheterogeneous across export industries.
Sunk costs of entry in foreign markets attenuate thenegative effect of uncertainty on export survival rates asfirms delay exiting the export market.
Introduction Methodology Results Robustness Conclusion
Policy Recommendations
Measures:
I Address coordination failures among public and privateactors involved in the movement of goods ⇒ IT andelectronic interconnection facilitate collaboration andinformation sharing.
I Implement WTO Trade Facilitation Agreement: provisionson advance rulings and border agency and Customscooperation.
I Support the modernization of border agencies ⇒ adoptionof risk management systems to reduce physical inspectionsfor low-risk consignments.