Hard and soft factors of trade facilitation and export diversification: Evidence for developing and the least developed countries

Abstract

This study examines how developing and the least developed countries (LDCs) can foster export diversification by considering trade facilitation as an effective policy option. Unlike previous studies, this paper constructs composite indicators—namely, hard and soft factors of trade facilitation—to better clarify which trade facilitation aspect is a matter of priority. Also, it uses the number of products and markets based on Harmonized System (HS) six-digit level as export diversification measures. Finally, it investigates the differentiated impacts of hard and soft factors on export diversification in the LDCs. For the period 2007–17 and 92 countries, the results reveal that border efficiency promotes variety in products and markets, and the availability and quality of infrastructure enhances variety in markets for the whole sample of countries. Moreover, strengthening the availability and use of information and communication technologies (ICTs) plays a significant role in the LDCs' export diversification.