which institutional and other obstacles to trade in this region deviate from expected values based on income, population and geography.

The composite indicators are drawn from the World Economic Forum (WEF) Enabling Trade Index (ETI), the World Bank Logistics Performance Index (LPI) and an index constructed from the World Bank Trading on Time variables presented in Table 7.<sup>14</sup> Higher values reflect fewer obstacles to international trade.

# **Table** **<u>8: Determinants of Trade Cost indicators</u>**

||ln<br>(GDP/Capita)|Ln<br>(GDP/Capita)<sup>2</sup>|Ln(area)|ln(population)|Landlocked|SADC<br>dummy|N|R<sup>2</sup>|
|---|---|---|---|---|---|---|---|---|
|Tdi<br>|<br>Overall index<br>-0.168|0.028|-0.265***|0.117***|-0.918***|-0.085|187|0.605|
|rang<br>on<br>|<br>Import index<br>0.032|0.017|-0.245***|0.103**|-0.990***|-0.149|187|0.603|
|Time index|<br>Export index<br>-0.368|0.039*|-0.286***|0.131***|-0.847***|-0.022|187|0.573|
||Overall index<br>-1.144**|0.093***|-0.115**|0.039|-0.071|0.214**|135|0.757|
||Market access<br>0.514|-0.028|-0.037|-0.082|0.157|0.540**|135|0.131|
||Border administration<br>-1.476**|0.123***|-0.204**|0.118**|-0.319**|0.224**|135|0.745|
||Efficiency<br>of<br>customs||||||||
||administration<br>-1.061|0.103**|-0.250**|0.188**|0.350*|0.365**|135|0.595|
|World<br>Economic<br>|Efficiency of import-export<br>procedures<br>-0.358<br>Transparency<br>of<br>border|0.049|-0.369***|0.199***|-1.112***|-0.034|135|0.67|
|Forum<br>Enabling|<br>administration<br>-3.013***<br>|0.219***|0.007|-0.033|-0.196|0.340***|135|0.768|
||Transport & communications||||||||
|Trade<br>Indices)|<br>infrastructure<br>-1.695***<br>Availability and quality of|0.139***|-0.132**|0.146***|0.017|-0.099|135|0.855|
||<br>transport infrastructure<br>-0.789*<br>Availability and quality of|0.082**|-0.024|0.069|0.014|0.152|135|0.687|
||transport services<br>-1.543**|0.121***|-0.227**|0.266***|0.146|-0.195|135|0.725|
||Availability and use of ICTs -2.736***|0.214***|-0.150**|0.107*|-0.106|-0.252*|135|0.879|
||Business environment<br>-1.910**|0.135***|-0.089|-0.027|-0.135|0.186|135|0.599|
||LPI Score<br>-1.192***|0.089***|-0.104***|0.150***|0.006|-0.017|161|0.806|
||Customs<br>-1.819***|0.126***|-0.103**|0.123***|0.004|0.04|161|0.751|
|World Bank|<br>Infrastructure<br>-1.707***|0.126***|-0.101**|0.178***|0.002|-0.045|161|0.828|
|Logistics|International Shipments<br>-0.627**|0.049***|-0.137***|0.137***|0.054|0.067|161|0.567|
|<br>Performance|<br> <br>Logistics<br>quality<br>and||||||||
|Index|<br> <br>competence<br>-1.237***|0.094***|-0.103**|0.172***|-0.025|0.023|161|0.773|
||<br>Tracking and tracing<br>-1.278***|0.095***|-0.125**|0.176***|0.002|-0.005|161|0.722|
||<br>Timeliness<br>-0.663**|0.056***|-0.051|0.123***|-0.009|-0.196**|161|0.657|

Notes: Estimates are robust to heteroskedasticity. The WEF based dependent variables range from 1 (worst outcome) to 7 (best outcome). PPP GDP per capita (2005 prices) and population are obtained from World Development Indicators. Internal distances are obtained from CEPII. The World Bank Doing Business (Trading on Time) indices are constructed as follows: The underlying variables (export and import costs, time and documents) are first standardized (mean 1 and variance 1). The simple average of these is then converted to a 1 to 7 scale (1 corresponds to worst outcome, 7 to best outcome). The underlying trading times, documents and costs are the most recent values available from the World Bank Doing Business Indicators (accessed 1 June 2010). The World Economic Forum Enabling Trade Indices are obtained from the WEF Global Enabling Trade Report (2009). Values for Botswana are obtained from the 2010 edition. Area measured using internal distance of country, which is calculated as _dii_  .067 _area_ /  (see Head and Mayer (2002). * p<.1; ** p<.05; *** p<.001 In Table 8, the explanatory variables are in columns and each row presents a regression for a different measure of trade costs. The simple regression fits the data reasonably well with 60 to over 80 percent of the variation in the composite indicators

> 14 The ETI and LPI are indicators of the various institutional, infrastructural and regulatory or policy constraints to the free flow of goods over borders. The WEF Enabling Trade Index, for example, is an index of barriers to trade related to market access, border administration, transport and communications infrastructure, and the business environment. The Logistics Performance Index is a summary of various areas of the logistics environment relating to customs clearance, trade and transport-related infrastructure, logistics services, etc. See WEF Global Enabling Trade Report (2009) and Arvis and others (2010) for further details on each index.

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