median clearance time and in clearance times at the 75<sup>th</sup> and 90<sup>th</sup> percentiles of the distribution. Reductions in the latter two statistics indicate a compression of the clearance time distribution, and thus reduced uncertainty about the time required for customs clearance.<sup>5</sup> We also investigate the effect of program adoption on the inspection rate. Reductions in clearance times, uncertainty or inspection rates (along with any other operational benefits) are likely to reduce (unobserved) trade costs and thus might allow participating firms to increase their imports. We therefore investigate changes in adopting firms’ monthly imports.

As with many customs reforms, evaluation of the IHC reform is complicated by a number of factors. First, randomized treatment is virtually impossible to implement given the operational demands of customs and other border agencies, so only _ex post_ evaluation methods are feasible. Second, financial and other costs associated with participation in the IHC program mean that relatively few Serbian importers began to use the program during the period of our data. Moreover, the participating firms differ substantially from the typical importing firm in the size and composition of their import bundle, and in the moments of the distribution of the time needed to clear their import shipments. The underlying heterogeneity of trade outcomes across treated and untreated units present important challenges for the evaluation of many trade facilitation reforms. Third, the trade outcomes we study have complex dynamics that are quite problematic for conventional impact evaluation tools such as difference-in-differences (DiD) estimators.<sup>6</sup> These challenges are daunting for any empirical methodology, but mitigated by the synthetic control method proposed by Abadie et al. (2010). We believe the method is well-suited for evaluation of many customs reforms. The method can exploit the high-quality administrative data that exists in the customs environment. In particular it can capture, and exploit, the complex dynamics observed in the outcome variables of interest. The method also offers more credible treatments of heterogeneity and selection than other _ex post_ evaluation methods. A recent methodology proposed by Dube and Zipperer (2015) offers a robust approach to hypothesis testing that pools synthetic control results across multiple treated units. Among other advances, the pooled approach allows heterogeneous impacts to be estimated across treated units, even as it

> 5 It may seem unusual to use these higher percentiles as measures of uncertainty rather than, for example, the variance or the interquartile range of the clearance time distribution.  The IHC program imposes a default clearance time that mechanically raises the clearance time in the lower half of the distribution for most IHC firms.  In our view reductions in clearance time at the upper end of the distribution are more valuable to the firm than reductions at the low end, so we focus on statistics that inform reductions at the upper end of the distribution.

> 6 Indeed, in this paper we show that DiD is invalid for an evaluation of the impact of the IHC program because the assumption of common trends is violated.

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