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Logistics costs and competitiveness: measurement and trade policy applications

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  • Shepherd, Ben

Abstract

This paper examines the issue of measuring logistics costs from an applied trade policy research perspective, as well as identifying logistics-intensive sectors. It focuses on currently available data at the macro- and firm-levels. Data sources considered include national accounts, national input-output tables, the International Comparison Project, firm-level data, and production and trade data. Although current data exhibit a number of weaknesses compared with “custom” logistics costs data—notably in terms of sectoral definition—they nonetheless make it possible to conduct some preliminary empirical analysis that can inform future measurement efforts. First, the paper finds that there is little systematic evidence of a link between the size of the logistics sector and economic outcomes, such as trade openness. Second, the relationship between the size of the logistics sector and logistics performance is non-monotonic. Third, the size of the logistics sector only increases in per capita income up to a certain point, before the relationship turns negative. These findings suggest that measures of sectoral size—such as logistics costs relative to GDP—may be of limited use to researchers and policymakers because they do not have an unambiguous interpretation in terms of performance or economic outcomes. Fourth, however, direct indicators of price and performance are more clearly related to economic outcomes, and have a more straightforward relation with per capita income. The emphasis going forward should therefore be on compiling data that capture logistics performance most accurately, rather than sector size. Finally, the paper uses input-output data to identify logistics-intensive sectors, and finds suggestive evidence that improvements in logistics performance could lead to sectoral reallocations in favor of relatively heavy industries in developing countries, which is consistent with the goal of export diversification.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38254.

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Date of creation: 03 Nov 2011
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Handle: RePEc:pra:mprapa:38254

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Keywords: Logistics; Trade policy; Data and measurement;

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  1. Olper, Alessandro & Raimondi, Valentina, 2007. "Patterns And Determinants Of International Trade Costs In The Food Industry," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9799, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Dollar, David & Hallward-Driemeier, Mary & Mengistae, Taye, 2004. "Investment climate and international integration," Policy Research Working Paper Series 3323, The World Bank.
  3. Chen, Natalie & Novy, Dennis, 2011. "Gravity, trade integration, and heterogeneity across industries," Journal of International Economics, Elsevier, vol. 85(2), pages 206-221.
  4. Yann Duval & Chorthip Utoktham, 2011. "Intraregional Trade Costs in Asia: A Primer," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 18(2), pages 1-23, December.
  5. Shepherd, Ben, 2009. "Speed Money: Time, Corruption, and Trade," MPRA Paper 17337, University Library of Munich, Germany.
  6. H. Brooks, Douglas & Ferrarini, Benno, 2010. "Changing Trade Costs between People’s Republic of China and India," ADB Economics Working Paper Series 203, Asian Development Bank.
  7. Bernard Hoekman & Alessandro Nicita, 2010. "Assessing the Doha Round: Market access, transactions costs and aid for trade facilitation," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 19(1), pages 65-79.
  8. John S. Wilson & Catherine L. Mann & Tsunehiro Otsuki, 2005. "Assessing the Benefits of Trade Facilitation: A Global Perspective," The World Economy, Wiley Blackwell, vol. 28(6), pages 841-871, 06.
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