Title: Aid for trade and the quality of service exports in recipient countries

Authors: Nguyen Thi Thu Huong; Danbee Park

Addresses: Faculty of Economics, Department of Foreign Trade Economics, Vietnam Maritime University, Hai Phong City, 180000, Vietnam ' Department of International Trade, Kangwon National University, Gangwon-do, 24341, South Korea

Abstract: Recent studies show that aid for trade (AfT) effectively improves not only trade volume but also the export sophistication of recipient countries. Gnangnon and Roberts (2017), Wang and Xu (2018), and Luu Hai (2021) found that AfT contributes to the merchandise export sophistication of recipient countries. We extend those previous studies by examining the impact of AfT on service export sophistication of recipient countries. We follow the method proposed by Hausmann et al. (2007) to measure the service export sophistication. Using the two-step system GMM estimator on a dataset of 135 countries over 2005-2022, we discover that AfT flows promote service export quality in recipient countries. Interestingly, AfT for non-service sectors exerts a stronger positive effect on the service export sophistication of recipient countries than AfT for service sectors. Our evidence also reveals that AfT flows are particularly crucial for upgrading service export sophistication in least developed countries (LDCs) and countries with better governance quality.

Keywords: AfT; aid for trade; governance quality; service export sophistication; service export quality; AfT recipient countries; GMM.

DOI: 10.1504/IJTGM.2024.145835

International Journal of Trade and Global Markets, 2024 Vol.20 No.3/4, pp.239 - 259

Received: 01 Apr 2024
Accepted: 12 Sep 2024
Published online: 29 Apr 2025 *

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