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Export Promotion and Poverty : What do we know?

Export Promotion and Poverty : What do we know?. Marcelo Olarreaga , University of Geneva and CEPR Arnoldshain XI University of Antwerp June 26-28, 2013. What do we know?. Positive impact of EPA on export growth ( Lederman et al. 2010) But who benefits ?

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Export Promotion and Poverty : What do we know?

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  1. Export Promotion and Poverty: What do we know? Marcelo Olarreaga, University of Geneva and CEPR Arnoldshain XI University of Antwerp June 26-28, 2013

  2. What do we know? • Positive impact of EPA on export growth (Lederman et al. 2010) • But whobenefits? • The evidence on trade, incomeinequality and povertyis mixed(Goldberg and Pavnick, 2004 and Winters et al., 2004) • On exports and povertyitis more positive (Porto 2004, 2008) • But no evidence on EPA induced export-growth • If EPA's focus on large firmsthen the inequality (and perhapspoverty) canincrease: 10 percent of firmsrepresent 70 to 80 percent of exports. • Poor households are likely to have theirincomeassociatedwithSMEs, not multinationals • Evidence for developed countries isworrisome (Bernard and Jensen, 1999 and Görg et al, 2008): • Impact only on the intensive margin, benefittinglarge establishedexporters and not new and smallerfirms.

  3. Literature on Impact of EPA in LDCs • Most existingstudies on the "extensive" margin in developing countries are conditional on being an exporter (Volpe et al, 2008, 2009, 2011 or Cadot et al. 2011) • Extensive marginisdefined as a new market or a new product, but not a new firm. • The distinction is important if we are focusing on poverty and incomeinequality. • New exporters are muchsmallerthanestablishedexporters • And povertyreductionislikely to come through the connectionof SMEs to world market • Existingstudiescanveryimperfectlyaddress the question of how EPA may affect poverty, or more precisely how EPAscan help SMEsconnect to world markets.

  4. The (almost) good news • Survey of EPAsaround the world suggeststhatpromoting SME exports istheirthird top priority

  5. The bad news • Survey of EPAsaround the world suggeststhat the largest budget shareisspent on establishedexporters, not on new or non-exporters…

  6. The really good news • In a study of the impact of sevenLAC'sEPAs on export growth (Lederman et al, 2013) findthat the mainly affect the entry and survival of firms in export markets. • So the small budget spent on new exporters and non-exportersseems to be effective. Diff in Diffwithnearestneighbormatching:

  7. Impact on poverty • Wedon't know. Weneed more evidence • But if EPAsworkthrough the firm entry marginwecanexpectSMEsbenefittingrelatively more than if itworksthrough the intensive margin. • EPAscan help maketrade more inclusive, and thereforemakeitpolitically more acceptable • But how canthey do it?

  8. what do epa's do? • Most of EPAs training grants are spent on helpingfind new markets

  9. The (neglected) role of e-commerce • E-commerce significantlyreduces information asymmetries (caputred by the impact of distance on tradeflows), makingiteasier for smallerfirms to participate in world markets (Lendle et al. 2012)

  10. Easier to buildreputation • Online platformsproviderelatively cheap ways of acquiringreputation Testingdifferences of gravitydeterminants for powersellers and others on eBay

  11. Impact islargerwheremostneeded • Online platformsproviderelatively cheap ways of acquiringreputation • And theseeffects are larger in remote countries with corruption, incomeinequality…. • 97% of firms on eBay export • DeviationsfromZipflawthatwe observe offline…. • Providingaccess to online marketscanbe a very efficient way of connecting the poor to foreignmarkets….

  12. Impact islargerwheremostneeded • Theseeffects are larger in poor countries with high incomeinequality….

  13. Easier to export for SMEs • 85% of US firms on eBay export (against 4% offline) – Lendle et al. (2013) • SME represent a largershare and deviationsfromZipf

  14. Concludingremarks • Weneed more research on the impact of export promotion on poverty and incomeinequality • A strong focus of EPA on SME can help dissipatefearsthatagencies are captured. • Online platformscouldprovide an interestingtool to help international tradebe more inclusive, makingeveryonebenefitdirectlyfromsmooth and well-functioningborders • Raises the question of how EPAscan help provideaccess to online markets: Local offices devoted to online marketsinstead of expensives offices abroad?

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