Highlights :

• I show that visas have a large negative impact on bilateral trade flows.
• The negative impact of visas is much larger for differentiated than for homogeneous products.
• Visas reduce the number of new products exported to a given market.
• Removing visas would increase welfare by nearly 10% for some sub-Saharan African countries and by 1,5% on average for developing countries.

 Abstract :
Travel visas impose additional costs to firms when engaging in international trade. This paper exploits a natural experiment provided by Schengen agreements to document a causal impact and examine how much trade in goods is affected. I show that visas have a large negative impact on bilateral trade flows. The introduction of a visa to enter the Schengen Space considerably reduced bilateral trade flows between Ecuador and Bolivia and members of the Schengen space. I also find that the negative impact of visas is much larger for differentiated than for homogeneous products and that visas reduce the number of new products exported to a given market. By applying a general equilibrium framework, the paper shows that removing visas would increase welfare by nearly 10% for some sub-Saharan African countries and by 1,5 % on average for developing countries. For policy makers this paper highlights the importance of including visa facilitation schemes into the provisions of trade agreements and other economic partnerships. 

 Keywords : International Trade | Trade Costs | Visas

 JEL : F14, F23, F63