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On the Impact of Transportation Costs on Trade in a Multilateral World

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Author Info

  • Peter Egger

    ()
    (University of Munich and Ifo Institute)

Abstract

This article proposes to account for the differences in the importance of transport costs, depending on characteristics of trading partners. In a multiregion model of trade in differentiated goods we expect a smaller impact of transport costs on a country's exports as a share of importer gross domestic product (GDP) the more (less) relatively capital-abundant the exporter (importer) is and the lower (higher) production costs are as captured by GDP at given factor endowments and diversity, all else equal. Empirically, this requires four interaction terms in addition to the direct impact of transport costs when estimating log-linear gravity models: one with the exporter GDP per capita or capital-labor ratio, a second one with the importer GDP per capita or capital-labor ratio, and a third and fourth with exporter and importer GDP, respectively. The hypotheses are strongly supported by the evidence from a large panel of bilateral trade between 1970 and 2000.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 71 (2005)
Issue (Month): 3 (January)
Pages: 592-606

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Handle: RePEc:sej:ancoec:v:71:3:y:2005:p:592-606

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D., 2006. "Road and Maritime Transport Costs: A Comparative Analysis of Spanish Exports to Poland and Turkey," Ibero America Institute for Econ. Research (IAI) Discussion Papers 138, Ibero-America Institute for Economic Research.

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