This paper focuses on how to estimate the effects of transaction costs in trade on Total Factor Productivity (TFP) and then on costs of production of the manufacturing sector when considering foreign R&D spillovers in Tunisia and Egypt. It compares the different components of Non-Tariff Barriers (NTBs) in Tunisia and Egypt in order to measure their effects, and more generally the trade transactioncosts, on productivity in the two countries. It also examines the effect of the R&D spillover and transaction costs on the costs of production of the manufacturing sectors.
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