increase trading costs—such as refrigeration or observance of phytosanitary measures— the Doing Business figures on export and import costs can be thought of as lower-bound estimates. These indicators provide information on the distribution of procedural requirements for export and import across countries. Even if the Doing Business indicators measure the costs of export and import procedures of a standardized container, it is difficult to know the average value of merchandise that a country exports and imports in the container, in order to express the costs as a percentage of the value of traded products. Another database is relevant in assessing trade costs in Africa. Based on a worldwide survey of express carriers and freight forwarders, the LPI provides a snapshot of the logistic-chain performance in the surveyed countries, including those in Africa. The data set covers logistic attributes closely related to “soft infrastructure” (e.g., efficiency of customs clearance, competence of local logistics industry, etc.).

To provide orders of magnitude of the relative importance of trade costs in the context of Africa, we build on Hoekman and Nicita’s (2008) database that incorporates Doing Business, LPI, and OTRI indicators to estimate a gravity model. After checking the robustness of estimated coefficients to the inclusion of different variables and to the use of several estimation methods, we employ the estimated coefficients to compute advalorem equivalents of diminishing the costs associated with trading a standardized container of goods, as measured by Doing Business, for the African countries in the sample (i.e., the equivalent change in ad-valorem tariff restrictiveness that leaves exports unchanged following a change in trade costs). Our counterfactual estimates offer insight into the effect of policy intervention to lower costs in the absence of more detailed measures of trade costs across products and countries.

# **_Methodology_**

Several studies have provided theoretical foundations for the gravity model and contributed to its popularity. These studies show that estimates can be derived from different theoretical frameworks, such as the Ricardian, Heckscher-Ohlin, and increasing returns to scale models.<sup>12</sup> Theoretical foundations for estimating gravity equations were also enhanced in Anderson and van Wincoop (2003, 2004). More recently, Helpman, Melitz, and Rubinstein (2008) (henceforth HMR) develop an international trade model with firm heterogeneity. We use the HMR framework as our starting point for the empirical work. The model incorporates firms with varying productivity so that only the more productive ones find it profitable to export. In addition, profitability of exports varies by destination, as exports are higher to countries with higher demand and lower variable and fixed export costs. According to the model, the distribution of firms in country _i_ exporting to country _j_ is bound by a marginal firm that just breaks even when exporting to _j_ , whereas more productive firms make positive profits when exporting to _j_ .

The model has several appealing characteristics that make it appropriate to explain some empirical patterns of trade flows. First, the model can generate asymmetric trade flows between two countries. Second, it can yield zero trade flows between some country pairs in either one or both directions. Third, the model yields a generalized gravity equation

> 12 See, for instance, Helpman and Krugman (1985), Deardorff (1998), and Eaton and Kortum (2002).

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