**Table 8. Effect of customs clearance time on imports by time-sensitivity**

||_Clea_|_rance time me_<br>Depe|_asured in days_<br>ndent variabl|Hl<br>_‐ 2007‐2012 pe_<br>e is first‐diff. i|Hl<br>_riod_<br>n log import va|_Clea_<br>lue at firm‐HS6|_rance time me_<br>product‐origin|_asured in hours_<br>country‐year|Hl<br>_‐ 2010‐2012 p_<br>level|Hl<br>_eriod_|
|---|---|---|---|---|---|---|---|---|---|---|
||Freund et al.||Freund et al.|<br>ummes<br>|ummes<br>|Freund et al.||Freund et al.|ummes<br>|<br>ummes<br>|
|||Freund et al.||and Schauer|and Schauer||Freund et al.||and Schauer|<br>and Schauer|
||(2010)<br>measure<br>parts & short<br>shelf‐life|<br>(2010)<br>measure just<br>parts|<br>(2010)<br>measure just<br>short shelf‐<br>life|<br> <br>(2013)<br>measure<br>parts & fresh|<br> <br>(2013)<br>measure just<br>fresh &|<br>(2010)<br>measure<br>parts & short<br>shelf‐life|<br>(2010)<br>measure just<br>parts|<br>(2010)<br>measure just<br>short shelf‐<br>life|<br>(2013)<br>measure<br>parts & fresh|<br> <br> <br>(2013)<br>measure just<br>fresh &|
|||||& frozen|frozen||||& frozen|frozen|
||||||IV esti|mation|||||
||(1)|(2)|(3)|(4)|(5)|(6)|(7)|(8)|(9)|(10)|
|First diff. in median clearance time|‐1.003***|‐1.039***|‐0.967***|‐0.984***|‐0.970***|‐0.024***|‐0.025***|‐0.023***|‐0.023***|‐0.023***|
||(0.159)|(0.160)|(0.174)|(0.154)|(0.150)|(0.008)|(0.008)|(0.008)|(0.008)|(0.008)|
|First diff. in median clearance time|||||||||||
|* Time sensitive dummy|0.242|0.519|‐63.675**|0.183|‐0.026|0.003|0.010|‐1.891**|‐0.002|0.008|
||(0.438)|(0.431)|(26.262)|(0.846)|(1.223)|(0.019)|(0.019)|(0.896)|(0.030)|(0.052)|
|Firm‐year fixed effects|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|
|HS6‐country‐‐year fixed effects|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|
|Observations|200,281|200,281|200,281|200,281|200,281|84,298|84,298|84,298|84,298|84,298|
|R‐squared|0.371|0.368|0.139|0.371|0.371|0.44|0.439|0.423|0.44|0.44|
|F‐stat from 1st stage regression|203|203|204|207|203|134|134|134|135|133|
|First‐stage coefficient on first‐diff.|||||||||||
|in median allocation to red channel|0.070***|0.070***|0.070***|0.073***|0.070***|1.969***|1.963***|1.992***|2.053***|1.987***|
||(0.004)|(0.004)|(0.003)|(0.004)|(0.003)|(0.130)|(0.130)|(0.122)|(0.128)|(0.122)|
|First‐stage coefficient on first‐diff.|||||||||||
|in median allocation to red channel|||||||||||
|* Time sensitive dummy|‐0.004|‐0.001|‐0.055|‐0.029|‐0.005|0.127|0.175|‐1.674|‐0.600|0.038|
||(0.009)|(0.010)|(0.043)|(0.010)|(0.025)|(0.324)|(0.327)|(1.995)|(0.357)|(0.882)|
|Proportion of observations with|||||||||||
|time sensitive dummy=1|11.7%|10.9%|0.8%|10.8%|1.9%|11.7%|11.1%|0.6%|10.7%|1.8%|

Notes: Robust standard errors in parentheses. *** and ** indicate significance at 1% and 5% confidence levels, respectively.

# **6.3 Heterogeneity across Firm Size**

Finally, we examine the differential effects of reductions in customs clearance time on import growth for firms of different size in the importing market. While it is likely that risk-based controls offer positive benefits to all firms that comply with import regulations, it is an open question whether reduced inspections arising from risk-based controls are relatively more favorable for firms that engage in more or less trade. On the one hand, compliant firms that are large/frequent traders might be more likely to receive favorable treatment in the risk models (and to do so sooner) because they have more opportunities to demonstrate their compliance.<sup>55</sup> On the other hand, less frequent traders might be less able to handle unexpected disruptions associated with random inspections.<sup>56</sup>

> 55 These firms may also have more to lose from a non-compliant shipment, if the shipment were to cause the level of inspection on subsequent shipments to ratchet upwards.  Understanding this, customs might undertake lower levels of inspection on the larger firms.

> 56 It may be for example, that infrequent traders are less likely to be able to meet demand through warehouse stock that has already been cleared through customs.  Smaller infrequent traders might also bear larger time costs because the capital costs of goods in transit are higher because their options for external financing are less advantageous than those for larger more frequent traders.  Our IV strategy is designed to circumvent such issues.

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