Paving the road to export: the trade impacts of domestic transport costs and road quality

Blyde, Juan (2010): Paving the road to export: the trade impacts of domestic transport costs and road quality.

Abstract

The literature examining the effects of domestic transport costs on trade flows is scarce. The few studies available rely mostly on distance-based measures as proxies of transport costs which impede analyzing the trade impacts of transport-infrastructure improvements, a critical aspect in regional and public policy. Applying a novel methodology that combines real freight costs and Geographic Information System (GIS) analysis to the case of Colombia, this paper measures the extent to which domestic transport costs -from the place of production to the port of shipment- act as a friction to international trade. Domestic transport costs are found to significantly affect the prospects of exporting. For instance, regions within the country with transport costs in the 25th percentile export around 2.3 times more than regions with transport costs in the 75th percentile, once other factors are controlled for. Export increases from road improvements are found to be larger in regions with initially higher transport costs. This is because regions with initially higher transport costs are normally associated with longer routes and those tend to have larger shares of roads in poor conditions

• Item Type: MPRA Paper
• Language: English
• Keywords: Transport costs, road quality, regional exports
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R10 - General; F - International Economics > F1 - Trade > F10 - General; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy

References

Ahlin, K. and J. Granlund. 2002. “Relating Road Roughness and Vehicle Speeds to Human Whole Body Vibration and Exposure Limits” The International Journal of Pavement Engineering. Vol 3(4)

Albarran, P., R. Carrasco and A. Holl. 2009. “Transport Infrastructure, Sunk Costs and Firm’s Export Behavior” Working Paper 09-22. Universidad Carlos III de Madrid.

Alvarez, Roberto, and Ricardo López. 2005. “Exporting and Performance: Evidence from Chilean Plants”. Canadian Journal of Economics. Vol 38, No.4: 1385-1400.

Anselin, L., R. Florax, and S. Rey. 2003. Advances in Spatial Econometrics. Springer

Aw, B., S., Chung, and M. Roberts (2000). “Productivity and turnover in the export market: micro-level evidence from the Republic of Korea and Taiwan (China), World Bank Economic Review, 14, 65-90

Barnes, G. and P. Langworthy. 2003. “The Per-Mile Costs of Operating Automobiles and Trucks” Report No. MN/RC 2003-19. Published by Minnesota Department of Transportation

Benedictis, G., G. Calfat and R. Flores Jr. 2006. “Challenging the pro-development role of trade agreements when remoteness counts: the Ecuadorian experience” Working Paper 2006.5, University of Antwerp.

Bernard, Andrew, Jonathan Eaton, Bradford Jensen and Samuel Kortum. 2003. “Plants and Productivity in International Trade”. American Economic Review. Vol 93, No 4: 1268-1290.

Clark, Ximena, David Dollar and Alejandro Micco. 2004. “Port Efficiency, Maritime Transport Costs, and Bilateral Trade”. Journal of Development Economics. Vol 75: 417-450.

Clerides, S., S. Lach, and J. Tybout (1998). “Is Learning by Exporting Important? Micro-dynamic Evidence from Colombia, Mexico and Morocco”, Quarterly Journal of Economics, 113.

Combes, P.-P., and M. Lafourcade. 2005. Transport Costs: Measures, Determinants, and Regional Policy. Implications for France. Journal of Economic Geography. 5.

Combes, P.-P., T. Mayer and J.-F. Thisse. 2008. Economic Geography, the Integration of Regions and Nations. Princeton University Press.

Costa-Campi, M. T. and M. Viladecans-Marsal. 1999. “The District Effect and the Competitiveness of Manufacturing Companies in Local Productive Systems”. Urban Studies. 36.

Glaeser, E. L., H. Kallal, J. Sheinkman, and A. Schleifer. 1992. “Growth in Cities”. Journal of Political Economy. 100.

Granato, M.F. 2008. “Regional Export Performance: First Nature, Agglomeration…and Destiny? The Role of Infrastructure”. Mimeographed document.

Harris, C. 1954. “The Market as a Factor in the Localization of Industry in the United States”. Annals of the Association of American Geographers. 64

Henderson, J. V., A. Kuncoro, and M. Turner. 1995. “Industrial Development in Cities”. Journal of Political Economy. 103.

Hirschman, A.O. 1958. The Strategy of Economic Development. Yale University Press, New Haven.

Hummels, David. 2001. “Toward a Geography of Trade Costs”. Department of Agricultural Economics, Purdue University. Mimeographed document.

Hummels, David & Lugovskyy, Volodymyr & Skiba, Alexandre. 2009. “The Trade Reducing Effects of Market Power in International Shipping”. Journal of Development Economics. Vol 89, No 1: 84-97

Jaffe, A., M. Trajtenberg, and R. Henderson. 1993. “Geographic Location of Knowledge Spillovers and Evidenced by Patent Citations” Quarterly Journal of Economics. 108.

Krugman, P., and A.J. Venables. 1995. “Globalization and the Inequality of Nations”. Quarterly Journal of Economics. 110.

Lafourcade, M., and E. Paluzie, 2008. “European Integration, FDI and the Geography of French Trade” Regional Studies (forthcoming).

Matthee, M., and W. Naudé. 2007. “The Determinants of Regional Manufactured Exports from a Developing Country”. Research Paper No. 2007/10. UNU-WIDER World Institute for Development Reconomics Research.

Melitz, Marc J. 2003. “The impact of trade on intra-industry reallocations and aggregate industry productivity” Econometrica. Vol 71, No 6: 1695-1725

Micco, Alejandro, and Tomas Serebrisky. 2006. “Competition Regimes and Air Transport Costs: The Effects of Open Skies Agreements”. Journal of International Economics. Vol 70 (1): 25-51

Moreira Mesquita, Mauricio, Christian Volpe and Juan Blyde. 2008 Unclogging the Arteries: The Impact of Transport Costs on Latin American and Caribbean Trade, Special Report on Integration and Trade. Washington, DC, United States: Inter-American Development Bank.

Nicolini, R. 2003. “On the Determinants of Regional Trade Flows” International Regional Science Review. 26(4)

Silva, J.M.C. and S. Tenreyro (2006). “The Log of Gravity” The Review of Economics and Statistics, Vol. 88, No. 4: 641-658.

UMTRI. 1998 University of Michigan Transportation Research Institute, The Little Book of Profiling, September, The Regent of the University of Michigan.

UMTRI. 2002 University of Michigan Transportation Research Institute, Research Review, Volume 33, Number 1.

Venables, A.J. 1996. “Equilibrium Locations of Vertically-linked Industries” International Economic Review. 37.