Export Promotion:

What Works and What

Doesnt
Daniel Lederman
The World Bank
Development Economics Research
Group
50th ETPO Conference
October 15, 2008

What You Want to Know

Are EPAs effective on average? $1US

produces about $40
How much should we spend in export
promotion? Small Is Beautiful
Should we focus on certain firms?
Large firms versus small exporters
Effectiveness depends on
institutional arrangements

The World of Export Promotion

Agencies

Widespread presence
Contacted 149 countries; in 116 there was an
EPA.

The Controversy
Public goods versus public institutions

Almost no empirical international analyses

of on their effectiveness

Descriptive and qualitative comparisons (ITC)

User or customer surveys and feedback
Some statistical analyses, e.g., Rose on role of
embassies

The World Bank and Export

Promotion: A Tense Relationship

World Bank Study by Hogan, Keesing

& Singer (1991):
Too bureaucratic;
Public sector incentives;
Focus on off-shore activities;
Under funded;
One size fits all approach due to
donors;
Anti-trade bias of protectionism.

Our Objectives
Do EPAs promote exports? Empirical
evidence.
What type of activity, institutional design,
targeting of exporters works best?
What we are not doing:
Check whether intervention is socially
desirable
Or is the return sufficiently high to justify
investing in an EPA rather than schooling,
roads, etc

International Survey of EPAs

A tool for benchmarking?

18 questions over structure,
responsibilities, objectives, financing,
and activities
149 countries were contacted; 116 had
a national EPA and were sent a survey
92 answered (4 said they couldnt
answer)
Each answer was followed with phone
calls to clarify and confirm responses

How Big Are EPA Budgets?

Learning from past mistakes: Share of executive

board seats in the hands of the private sector

Promotion for Whom?

Large Firms versus Established Exporters

What Do EPAs Do?

Correlation is Not Causation:

Exports and EPA Budgets
Log of Exports of Good and Services per capita
2
4
6
8
10

Lowess smoother
HKG
IRL
NLD CHE
DEU

YEM

SLE

NOR
DNK
PRI
AUT
SWE
ISL
FIN
MLT
TWN
GBR

ISR
FRA
SVN
MYS
AUS
ESP
CZE
TTO
HUN
PRT
SVK
MUS
PAN
LTU
CRI
MEX GRD
BWA
CHLBLZ
LVA
THAFJI
VEN
JAM
DOM
BGR TUN
URY
GUY
TUR
ZAF
JOR
DZA
LBN
SLV
BRA
COL ECU
PRY
MAR
HND
PER
YUG
GTM
CIV
ARMEGY
BOL
MDA
KHM
NIC
WBG
GHA
KEN
ZMB
MOZ
BGD
MWI TZA
UGA
NER
RWA
BFA

-5
bandwidth = .8

0
Log of Export Promotion Agency budget per capita

EST
DMA

More Technical Analysis Is Necessary:

The Problem of Spurious Correlations
1)

Ommitted Variables
y
y
y
y
y
y

2)

Sample Bias
y
y

3)

GDP per capita (institutions, infrastructure);

Own trade restrictiveness (OTRI)
Partners trade restrictiveness (MOTRI)
Exchange rate volatility
Regulatory burden on exporters (WBs Doing business)
Other controls
Probability of answering the survey was lower for poor
and small countries,
Agencies in the poorest countries were more likely to be
funded by donors, the role of foreign aid per capita

Reverse Causality
y

High exports lead to the establishment of EPAs

Results: Selection Bias

With a
coefficient of
0.10, we are on
the high end of
Roses estimate
for Embassies in
his gravity setup.
But we have
more developing
countries in our
sample, and we
havent
corrected for
endogeneity yet

Results: Reverse
Causality
Results

Results: what works and what doesnt

What Works and What Doesnt

Does Export Promotion Pay for Itself?: $1

produces $40 in exports, but beware of
heterogeneity!
Optimal Budget: $1
per person

What You Want to Know, Take 2

Are EPAs effective on average? $1US

produces about $40
How much should we spend in export
promotion? Small Is Beautiful
Should we focus on certain firms?
Large firms versus small exporters
Effectiveness depends on
institutional arrangements

Looking Forward

Further research and evaluation is

needed
Case studies with time series data
Firms success following participation in EPA
programs. See Roberto Alvarez, International
Business Review, 13, 2004.

Designing country-specific
evaluations is difficult
Spillovers and evaluations