# **I. Introduction**

There is growing evidence that time is a significant impediment to trade. Still, there are marked variations in the required time for exports to take place across countries. It takes 43 days in Cambodia to move a 20-foot export container from the factory to the nearest port and complete all the administrative hurdles to load it onto a ship. By contrast, it takes just 18 days in Malaysia or China<sup>1</sup> . Time delays impose additional transaction costs on traders. An increase of shipping time of one day, for instance, could be worth 0.8 percent ad-valorem of a traded good (Hummels 2001).

Moreover, the adverse effects are greater on time-sensitive goods (Harrigan and Venables 2004, Djankov et al. 2008). This changes the composition of a country’s export bundles. In industries having just-in-time business practices, for instance, the entire production process will come to a halt if even a single input is missing. In industries shifting toward a more fragmented process and relying on international supply chains, delays in the delivery of intermediates accrue in all successive production stages. Eventually, small transaction costs can amount to disproportionately large values. Time delays yield higher transaction costs for these timesensitive industries, and, thus, disproportionately dampen their exports.

Given this, the large differences across countries in the time need to export may help to explain why exports in sectors relying on timeliness grow rapidly in some countries but remain impeded in others. That is, time acts as a determinant of comparative advantage in addition to a wedge on trade flows. The variations in countries’ ability to move goods for exports stem from differences in the efficiency of infrastructure services, logistics services, trade regulations, customs administration, as well as the quality of broader regulatory policies and institutions.

Empirical evidence on the compositional effects of time as a trade barrier is scarce. Existing literature mainly look at the aggregated effects of time costs on a country’s trade without distinguishing the channel of compositional effects. A handful of studies began to look at the issue but they rely on data of aggregated trade flows (e.g. Djankov et al. 2008). Firms are _the_ major players in global production and trade. It is critical to understanding trade costs and trade facilitation from their perspective. Thus, in this paper, we take a step toward filling the gap and try to answer: Do we observe this impact of time delays at the firm level? For that purpose, we test whether firms of more time-sensitive sectors perform better in countries that are able to move goods quicker for exports. First, we study whether time delays affect the probabilities of exporting. The channel builds on the well-established insight that decreasing trade costs will reduce the minimum productivity level necessary for entering export markets and increase the average probabilities of exporting (e.g. Melitz 2003). One might also expect existing exporters to send more products abroad following a reduction in trade costs. As a second test, we assess the impact of time delays on export intensities, i.e. the shares of exports in total sales.

We compile a unique cross-country data set which pools information from the Enterprise Surveys of 64 countries together with data on time required for exports to take place from the Doing Business database. To quantify the time sensitivities of industries, we construct a variable

> 1 The information is from the Doing Business database and is recorded as an average within a specific country.

2