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Endogenous Transport Prices and Trade Imbalances

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  • Olaf Jonkeren

    ()
    (VU University Amsterdam)

  • Erhan Demirel

    ()
    (VU University Amsterdam)

  • Jos van Ommeren

    ()
    (VU University Amsterdam)

  • Piet Rietveld

    ()
    (VU University Amsterdam)

Abstract

According to economic theory, imbalances in trade flows affect transport prices because (some) carriers have to return without cargo from the low demand region to the high demand region. Therefore, transport prices in the high demand direction have to exceed those in the low demand direction. This implies that transport costs, and therefore trade costs, are fundamentally endogenous with respect to trade imbalances. We study this effect using transport prices for the inland waterway transport market in north-west Europe. We find that imbalances in trade flows have substantial effects on transport prices. We estimate that a one standard deviation increase in the trade imbalance from region A to region B decreases transport prices from A to B by about 8 percent.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-088/3.

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Date of creation: 17 Sep 2008
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Handle: RePEc:dgr:uvatin:20080088

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Keywords: Imbalances in trade flows; trade costs; inland waterway transport market;

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Citations

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Cited by:
  1. Joern Kleinert & Julia Spies, 2011. "Endogenous Transport Costs in International Trade," IAW Discussion Papers 74, Institut für Angewandte Wirtschaftsforschung (IAW).
  2. Inmaculada Martínez-Zarzoso & Sami Bensassi, 2011. "The price of modern maritime piracy," Ibero America Institute for Econ. Research (IAI) Discussion Papers 213, Ibero-America Institute for Economic Research.
  3. Demirel, Erhan & Ommeren, Jos van & Rietveld, Piet, 2010. "A matching model for the backhaul problem," Transportation Research Part B: Methodological, Elsevier, vol. 44(4), pages 549-561, May.
  4. Takahashi, Takaaki, 2011. "Directional imbalance in transport prices and economic geography," Journal of Urban Economics, Elsevier, vol. 69(1), pages 92-102, January.

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