Aid for trade and export sophistication in recipient countries

This study investigates the effects of Aid for Trade (AfT) on the sophistication level of recipient countries’ export baskets. The results indicate that total AfT inflows do not benefit the export sophistication. AfT for trade policy and regulations seems to be the only type of AfT that are found to be effective in low-income countries with a real GDP per capita of less than USD 3047.72 and the poorer the recipient country the greater the positive impact on export sophistication. In contrast, the effect of AfT for economic infrastructure seems to be increasing in per capita income. The positive and negative significant effects of AfT for economic infrastructure are observed for countries with real GDP per capita above USD 29,542.64 and below USD 2558.02, respectively. Otherwise, there are no significant impacts of these two categories on export sophistication. AfT dedicated to building productive capacity exerts a negative impact on the export sophistication at the sectoral level.