country and an interaction between logistics and income level which applies only to developing countries as in equation (39). This produces a higher logistics coe¢ cient than the analogous estimate in Table 2 together with insigni...cant estimates for the income dummy and interaction. The insigni...cance may be due to high multicolinearity - the variance in‡ation factors for the income dummy and the interaction are 118 and 72 respectively - but could imply that income level makes no di¤erence. However, the coe¢ cient is di¤erent to that for developing countries estimated alone. This may be in part to di¤erent coe¢ cient estimates for the other trade costs variables. In other words, fully isolating separate developing country e¤ects may require a number of interactions with income for a large number of trade cost variables and not just logistics. IV estimates are unreliable. Using the sum of start-up procedures in both exporter and importer as one instrument and their product as another - as done before - yields very poor identi...cation of the coe¢ cients of interest. They are all individually insigni...cant, but the.coe¢ cients imply logistics quality reduces exports in rich countries and has a huge positive impact on developing country exports.

Moving onto the heterogeneous ...rms model, we present two estimates where the bilateral component of the Samecountry variable is excluded. Column 4 controls for country and ...rm selection. The estimates implied for developing countries are individually insigni...cant but jointly signi...cant at the 5% level. Compared to the speci...cation controlling for country and ...rm selection for developing countries, this assigns a relatively greater role to the intensive margin and a smaller role to the extensive margin. As was the case for developing countries only, speci...cations controlling for country and ...rm selection were not robust to the choice of excluded variable. Unlike the developing country estimates, there is a large and negatively signi...cant IMR term. Therefore, it is not entirely surprising that attempting to control only for ...rm-selection yields nonsensical results. Most importantly, it produces a negative delta term, which is theoretically inconsistent and precludes the calculation of country-level comparative statics.

While we ave provided estimates based on the exclusion of the Samecountry variable for consistency and brevity, we stress that these results are representative of a range of alternative speci...cations, including those which exclude the bilateral component of the trade cost, alternative excluded variables and specifying a reduced-form interaction of D<sup>j</sup> (Li + Lj) instead of our theoretically derived estimates and speci...cations which exclude the high_income dummy to reduce colinearity. We also tried a number of alternative instrument combinations and functional forms for the IV estimates. These consistently yielded poorly identi...ed results as well as negative delta coe¢ cients or IMR terms.

We additionally estimated speci...cations on the full sample without the income dummy or interactions. The results were more plausible for the IV estimates but equally untrustworthy for the heterpgeneous ...rms models. Furthermore, the OLS coe¢ cient on logistics (0:876) was higher than that for the analogous developing country estimate.

29