Trade costs, Openness and Productivity: Market Access at Home and Abroad

Lejour, Arjan and Rojas Romasgosa, Hugo and Rodriguez, Victor and Montalvo, Carvos and Van der Zee, Frans (2009): Trade costs, Openness and Productivity: Market Access at Home and Abroad. Published in: Industrial Policy and Economic Reform Papers No. 10 (January 2009)

Abstract

This paper discusses the channels between openness and productivity and trade hampering factors. The stylized facts from the heterogeneous firms literature suggests that firms face market entry costs for each new product they export and to each new export market. Transport costs, border costs and retail and wholesale distribution costs might add up to 170% of the export value, but formal import tariffs and duties are relatively unimportant. The results by the Observatory of European SMEs survey, which has firm-level data for the whole European Union confirm this result. Lack of knowledge on export markets and regulations in other countries are important trade barriers for European firms. From these outcomes it could be derived that EU trade policies should be directed to deep integration with other countries, preferably by implementing internal market policies for goods and services trade and foreign direct investment. These policies can deal with reducing regulations heterogeneity, non-tariff barriers and customs procedures. Providing public information on export markets (e.g. customers, contact, and distribution networks) could also be helpful, if well targeted.

• Item Type: MPRA Paper
• Language: English
• Keywords: Openness; productivity; heterogeneous firms; innovation; trade costs; trade policy
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies

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