Effectiveness of Aid for Trade in Small and Vulnerable Economies

An Empirical Assessment

image of Effectiveness of Aid for Trade in Small and Vulnerable Economies
This Economic Paper presents the first analyses of the use and effectiveness of Aid for Trade (AfT), the initiative to help developing countries boost their involvement in the global economy, for small and vulnerable economies (SVEs). It examines in detail the extent to which SVEs have been able to access AfT funds and to what extent this assistance has helped them to improve their trade performance.

Well designed traderelated assistance will help SVEs face the challenges posed by their characteristics, particularly when the prospects for small states have been deteriorating further due to preference erosion and the emergence of new and large competitors.



Empirical analysis on the effects of aid for trade on SVEs

We build on the previous study by Calì and te Velde (2008) to empirically assess the impact of AfT on SVEs and compare it with the impact on the rest of developing countries. As in the rest of this study, we adopt the Commonwealth Secretariat definition of SVEs as the main way of identifying those countries. As a robustness check we also test the findings by using the WTO definition of SVEs. Following the theoretical framework in the previous section, we use two ways of assessing the impact: first, a relatively narrow one looking at the effects of a specific category of AfT (i.e. trade facilitation) on the costs of trading; second, a broader assessment of the effects of AfT on exports which represents an empirical implementation of equation (6).


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