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Domestic Road Infrastructure and International Trade: Evidence from Turkey

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  • A. Kerem Cosar

    ()
    (University of Chicago, Booth School of Business)

  • Banu Demir

    ()
    (Bilkent University, Department of Economics)

Abstract

Poor domestic transportation infrastructure in developing countries is often cited as an important impediment for accessing international markets. Yet, evidence on how transportation infrastructure improvements affect the volume and composition of exports is scarce. Drawing on the large-scale public investment in expressways undertaken in Turkey during the 2000s, this paper contributes to our understanding of how internal trade costs affect regional exports and specialization. Two results emerge. First, we estimate that this road infrastructure project accounts for 15 percent of the export increase from interior regions, generating a 10-year discounted stream of additional export revenues that amount to between 9 and 14 percent of the value of the investment. Second, while the exports of all industries within a given region increase in response to improvements in connectivity to the international gateways of the country, the magnitude of this increase is larger the more time sensitive an industry is. Accordingly, we also observe an increase in the regional employment and revenue shares of such industries. Our results support the hypothesis that internal trade costs can be a determinant of international specialization and comparative advantage.

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Bibliographic Info

Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1406.

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Length: 36 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:koc:wpaper:1406

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Keywords: international trade; infrastructure; transportation costs; time-sensitive industries.;

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  1. Volpe Martincus, Christian & Blyde, Juan, 2013. "Shaky roads and trembling exports: Assessing the trade effects of domestic infrastructure using a natural experiment," Journal of International Economics, Elsevier, vol. 90(1), pages 148-161.
  2. James Harrigan, 2005. "Airplanes and Comparative Advantage," NBER Working Papers 11688, National Bureau of Economic Research, Inc.
  3. A. Kerem Coşar & Pablo D. Fajgelbaum, 2013. "Internal Geography, International Trade, and Regional Specialization," NBER Working Papers 19697, National Bureau of Economic Research, Inc.
  4. Juan Blyde, 2013. "Paving the Road to Export: Assessing the Trade Impact of Road Quality," International Economic Journal, Taylor & Francis Journals, vol. 27(4), pages 663-681, December.
  5. Carolyn L. Evans & James Harrigan, 2005. "Distance, Time, and Specialization: Lean Retailing in General Equilibrium," American Economic Review, American Economic Association, vol. 95(1), pages 292-313, March.
  6. Treb Allen & Costas Arkolakis, 2013. "Trade and the Topography of the Spatial Economy," NBER Working Papers 19181, National Bureau of Economic Research, Inc.
  7. Donald J. Rousslang & Theodore To, 1993. "Domestic Trade and Transportation Costs as Barriers to International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 208-21, February.
  8. David Hummels & Georg Schaur, 2012. "Time as a Trade Barrier," NBER Working Papers 17758, National Bureau of Economic Research, Inc.
  9. Jennifer Abel-Koch, 2013. "Who Uses Intermediaries in International Trade? Evidence from Firm-level Survey Data," The World Economy, Wiley Blackwell, vol. 36(8), pages 1041-1064, 08.
  10. Duranton, Gilles & Morrow, Peter & Turner, Matthew A, 2013. "Roads and Trade: Evidence from the US," CEPR Discussion Papers 9393, C.E.P.R. Discussion Papers.
  11. John Fernald, 1997. "Roads to prosperity? assessing the link between public capital and productivity," International Finance Discussion Papers 592, Board of Governors of the Federal Reserve System (U.S.).
  12. Dave Donaldson & Richard Hornbeck, 2013. "Railroads and American Economic Growth: A “Market Access” Approach," NBER Working Papers 19213, National Bureau of Economic Research, Inc.
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