access to finance) and the demand side (i.e., inadequate returns to investment and/or inadequate private appropriability of returns).

Another approach proposed more recently is the _Growth Identification and Facilitation Framework_ (GIFF) which focuses on exports and on first the identification of sectors of latent comparative advantage and second on feasible and focused policies to achieve structural transformation toward the production in these sectors (Lin and Monga, 2010). Like the product space analysis proposed by Haussmann and Hidalgo,<sup>13</sup> this approach commences with the identification of a list of tradeable goods and services. However, the focus is not on related products but on products exported in the previous 20 years in dynamically growing countries with similar endowment structures and per capita income. The methodology then focuses on specific measures to develop priority sectors including: identifying binding constraints; attracting global investors and/or incubating domestic firms; highlighting unique country endowments and new technologies/industries; developing targeted interventions to address poor infrastructure and bad business environments; and providing time bound incentives to pioneer firms.

- Empirical work on determinants of trade and investment

The availability of indicators has led to advances in the empirical understanding of determinants of trade and investment outcomes at a more granular level and a considerable literature. Offering firm level data and a large array of firm level indicators, including direct and indirect measurement of policy induced costs, Enterprise Survey data is a key contributor. Among the seminal works, Dollar, Hallward-Driemeier and Mengistae (2005) show using enterprise survey data that the investment climate affects various metrics of firms’ performance. Dollar, Hallward-Driemeier and Mengistae (2006) use surveys from 8 countries to assess the impact of policies affecting investment climate on firm international trade integration. Low customs clearance times, reliable infrastructure and good financial services are associated with the likelihood to export. Eifert, Gelb and Rachamandran (2005) and Eifert, Gelb and Rachamandran (2008) find the importance of high indirect and business environment cost impact negatively the productivity of African firms relative to those in other countries.

Likewise, Doing Business data has led to a vast literature on structural and policy factors linked with participation in international trade and investments flows. Early works include Djankov, Freund and Pham (2006), who measure how border policies impact the ability of firms to trade, showing notably that time lost at the border is especially costly. Sekkat and Varoudakis (2007) examine the impact of investment climate on FDI.

In the empirical literature on the effects on trade of institutional and structural variables, the predictive power of the gravity model introduced by Tinbergen (1962) has made it the most popular tool. Gravity modeling helped establish firmly the empirical truth about the role of distance and economic size as key factors of bilateral international trade flows. The model has been refined over the years, as well as grounded to the main theories of international trade (see for a comprehensive review Head and Mayer, 2013). From its inception, the gravity model has been used to test the existence of policy dimensions linked to trade, and it has been essential in furthering the understanding of the drivers of international trade and transaction costs (transport costs, and trade policies) directing trade flows. The gravity approach has also been applied with success to other bilateral economic flows: services (Kimura and

> 13 Hidalgo, Klinger, Barabasi and Hausmann (2007).

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