Trade Facilitation and Expanding the Benefits of Trade: Evidence from Firm Level Data

Existing empirical studies on trade costs and trade facilitation largely focus on aggregate impacts of reform due to data availability. We take a step toward filling in this gap in literature. Using the World Bank Enterprises Surveys, the study extends the scope of empirical literature to firm dimension with a focus on SMEs. For Asia countries, we find that improvement in trade facilitation indicators tend to increase the probability that SMEs will become exporter-- as well as their export propensity. In particular, increasing policy predictability and enhancing information technology services are the most effective measures for SMEs in expanding trade. We also find that SMEs are less responsive to improvement in transportation infrastructure, overall, than large enterprises while increasing policy predictability matters more to SMEs. In summary, in order to expand the benefits of trade to SMEs, countries need to make more substantial investments in reform – in particular in the ―soft‖ part of trade facilitation