Time as a Trade Barrier
AbstractInternational trade occurs in physical space and moving goods requires time. This paper examines the importance of time as a trade barrier, estimates the magnitude of time costs, and relates these to patterns of trade and the international organization of production. Estimates indicate that each additional day spent in transport reduces the probability that the US will source from that country by 1 – 1.5 percent. Conditional on exporting country, estimates directly identify a willingness-to-pay for time savings using variation across exporters and commodities in the relative price / speed tradeoff for air and ocean shipping. Each day saved in shipping time is worth 0.8 percent ad-valorem for manufactured goods. Relative declines over time in air shipping prices make time-savings less expensive, providing a compelling explanation for aggregate trade growth, compositional effects in trade growth, as well as growth in time-intensive forms of integration such as vertical specialization. Specifically, the advent of fast transport (air shipping and faster ocean vessels) is equivalent to reducing tariffs on manufactured goods from 32% to 9% between 1950-1998.
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Bibliographic InfoPaper provided by Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University in its series GTAP Working Papers with number 1152.
Date of creation: 2001
Date of revision:
Note: GTAP Working Paper No. 18
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Other versions of this item:
- F1 - International Economics - - Trade
- F15 - International Economics - - Trade - - - Economic Integration
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