Coming together: how trade facilitation reduces the distance elasticity
摘要
Distance constitutes a significant barrier to trade, with its effects compounded by red tape and complex border procedures. This paper uses trade and production data across 146 sectors, 228 exporters, and 163 importers during 2012–2019 to provide cross-country evidence that trade facilitation can reduce the negative impact of distance on trade (the distance elasticity). A one standard deviation increase (0.44 index points) in the OECD’s Trade Facilitation Indicators (TFI) is estimated to decrease the distance elasticity by 20%. Sector- and product-level analyses reveal that at higher TFI levels, distance elasticities narrow, with the most distance-sensitive sectors showing the largest gains from streamlined border processes. These findings highlight the critical role of trade facilitation in overcoming geographic barriers, particularly for low-income countries, where such measures could yield substantial trade benefits.