How big is the impact of infrastructure on trade? Evidence from meta-analysis

Low levels of infrastructure quality and quantity can create trade impediments through increased transport costs. Since the late 1990s an increasing number of trade studies have taken infrastructure into account. The purpose of the present paper is to quantify the importance of infrastructure for trade by means of meta-analysis and meta-regression techniques that synthesize various studies. The type of infrastructure that we focus on is mainly public infrastructure in transportation and communication. We examine the impact of infrastructure on trade by means of estimates obtained from 36 primary studies that yielded 542 infrastructure elasticities of trade. We explicitly take into account that infrastructure can be measured in various ways and that its impact depends on the location of the infrastructure. We estimate several meta-regression models that control for observed heterogeneity in terms of variation across different methodologies, infrastructure types, geographical areas and their economic features, model specifications, and publication characteristics. Additionally, random effects account for between-study unspecified heterogeneity, while publication bias is explicitly addressed by means of the Hedges model. After controlling for all these issues we find that a 1 per cent increase in own infrastructure increases exports by about 0.6 per cent and imports by about 0.3 per cent. Such elasticities are generally larger for developing countries, land infrastructure, IV or panel data estimation, and macro-level analyses. They also depend on the inclusion or exclusion of various common covariates in trade regressions