Export promotion agencies do increase exports

Many thanks to Pablo for pointing me to an excellent note (PDF) from the World Bank on export promotion agencies (EPAs). It's the first cross-country statistical analysis of the impact of these agencies on exports, and it covers 119 countries. The main message (via Jonathan Dingel):

For each $1 of export promotion, we estimate a $300 increase in exports for the median EPA. However, there is heterogeneity across regions, levels of development and types of instruments. Furthermore, there are strong diminishing returns, suggesting that as far as EPAs are concerned small is beautiful.

After a brief summary of the economic debates to date around these agencies, the authors give specific recommendations based on the data:

• EPAs should have a large share of the executive board in the hands of the private sector, but they should also have a large share of public sector funding. In other words, a full privatization of EPAs does not seem to work.
• A single and strong EPA should be preferred to the sometimes observed proliferation of agencies within countries.
• Results also suggest that EPAs should focus on nontraditional exports or have some broad sector orientation, rather than attempt to promote overall exports.
• They should focus their expenditure on on-shore export support services rather than on country image or marketing and market research activities.

For a slightly different take on EPAs, see my previous post. Also see the rest of the World Bank's Trade Note Series for other trade topics in readable form.