# **“Time for Export” Indicator and Time Sensitivity**

We use the “time for export” indicator from the Doing Business database to measure the required time for exports to take place. The information is collected through contacting local freight forwarders, shipping lines, customs brokers and port officials. The indicator represents the days it takes to move a standard 20-foot dry-cargo from a factory in the largest business city to a ship in the most accessible port and clear all customs, regulatory and port procedures<sup>18</sup> (Appendix 4). It registers the remarkable variations of export time across countries. The process takes only 9 days in Panama, 10 days in Lithuania, and 18 days in China and Malaysia. By contrast, the indicator in some landlocked countries more than triples: 58 days in Mongolia, 59 days in Niger, 64 days in Kyrgyzstan and 66 days in Laos. Poor infrastructure services are only one part of the story. The Doing Business database reports the corresponding time for each stage of the export process in its 2009 edition, including document preparation, customs clearance, ports and terminal handling, and inland transportation and handling. Based on the information, only about one third of the delays in the sample can be attributed to poor ports or terminals and poor inland transport systems. More than two thirds of the delays are caused by administrative procedures—documents preparation, customs clearance, cargo inspection, etc.

The information of “time for export” is available since 2005. More than half of our observations, however, are from the Enterprise Surveys conducted prior to 2005. To avoid losing these observations, we use the logarithm of the 2005 value of the indicator as our primary measure. We do not expect this to bias our results since the cross-country differences in the indicator dominate the within-country differences—the between standard deviation is about three times the within standard deviation (Appendix 4). We also use data recorded from the same year to check the robustness of our results.

We measure the time sensitivities of industries by calculating the shares of air transport in total international transport costs. International transaction put a significant lag between when a product is purchased and when it arrives. Air transport helps to bring producers and consumers closer significantly in time. Shipping containers from European ports to the US Midwest requires 2-3 weeks; Far Eastern ports 6 weeks. By contrast, air shipping requires only a day or less to most destinations. But it is also more expensive. In US imports, costs per kg shipped are on average 6.6 times higher for air shipment<sup>19</sup> . As discussed, time imposes additional costs on traders. In this environment, there exists a-willingness-to-pay for time savings (Hummels 2001). Manufactures trade off fast but expensive air transport against low but cheap ocean or land shipping<sup>20</sup> . A significant proportion of internationally traded products are now transported via a mixture of modes. For instance, they mount to 71 percent of all US imports from outside of North America. In this environment, manufacturers are more willing to pay for a higher premium when the goods are time sensitive. It follows that the extent to which a product is shipped by airplanes represents its time sensitivity.

> 18 For more information on the construction of the indicator, see Djankov et al. (2008) and the Doing Business Website http://www.doingbusiness.org/MethodologySurveys/TradingAcrossBorders.aspx. 19 See Hummels and Schaur (2009) for details.

> 20 Air transport has shown to be an alternative solution to the timeliness problem (Aizenman 2004, Hummels and Schaur 2009).

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