20 Years of Arnoldshain Seminar
“20 Years of Challenges for Integration, Globalization, and Development”
September 14 – 18, 2015
Frankfurt and Arnoldshain / Taunus

Nowak-Lehmann, Felicitas    
AbstracttitleIs Aid for Trade Effective? A Panel-Quantile Regression Approach
Coco-authored with Inmaculada Martínez-Zarzoso, Kai Rehwald
ShortabstractThis paper investigates whether Aid for Trade (AfT) leads to greater exports. Using panel data and panel quantile regression, our results suggest that overall AfT disbursements promote the export of goods and services in the short and in the long run, but mainly for the lower quantiles (0.1; 0.25; 0.50) of the conditional distribution of exports. This effect essentially vanishes at the higher tail of the distribution. Hence, countries that export less in volume are those benefiting most from AfT. We also investigate which types of AfT are effective. Aid to improve trade policy and regulation is associated with higher exports for all quantiles, with the effect increasing at the higher end of the distribution. Aid to build productive capacity is effective for the lower quantiles of the export distribution, with the effect decreasing at the upper tail of the conditional distribution. Aid used to build infrastructure is found to affect exports at only the lowest tail of the distribution. In contrast, aid disbursed for general budget support (an untargeted type of aid) is not associated with greater export levels. This finding holds true irrespective of the quantile.