Political strikes and its impacts on trade: Evidence from Bangladeshi transaction-level export data

Project Active from to Firms and Trade

Delays are an important barrier to international trade. Djankov, Freund, and Pham (2010) estimate that an additional day spent prior to shipment reduces trade by more than 1 percent. Similarly, Hummels and Schaur (2012) estimate that each day spent in transit costs a firm 0.6–2.1 percent of its shipment’s value. Such delays are extremely costly for several reasons. First, delays impose significant inventory-holding costs. Second, delays are costly for firms that export or import perishable goods as well as goods that have seasonal demand. The existing literature has focused on two key sources of these delays: (a) weak domestic infrastructure and procedural barriers at ports (Djankov et al. 2010) and (b) the mode of transport used (Hummels 2007; Hummels and Schaur 2010, 2013). In this project, the researchers examine a third source of delays for exporting firms: political instability. In particular, we examine how instability due to political strikes impact exports in Bangladesh during the period 2005−2013.

We examine these issues using two sets of data: (a) data on hartals and (b) daily, firm-level data on exports.