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Port efficiency, maritime transport costs, and bilateral trade

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  • Clark, Ximena
  • Dollar, David
  • Micco, Alejandro

Abstract

Recent literature has emphasized the importance of transport costs and infrastructure in explaining trade, access to markets, and increases in per capita income. For most Latin American countries, transport costs are a greater barrier to U.S. markets than import tariffs. We investigate the determinants of shipping costs to the U.S. with a large database of more than 300,000 observations per year on shipments of products aggregated at six-digit HS level from different ports around the world. Distance volumes and product characteristics matter. In addition, we find that ports efficiency is an important determinant of shipping costs. Improving port efficiency from the 25th to the 75th percentile reduces shipping costs by 12 percent. (Bad ports are equivalent to being 60% farther away from markets for the average country.) Inefficient ports also increase handling costs, which are one of the components of shipping costs. Reductions in country inefficiencies associated to transport costs from the 25th to 75th percentiles imply an increase in bilateral trade of around 25 percent. Finally, we try to explain variations in port efficiency and find that they are linked to excessive regulation, the prevalence of organized crime, and the general condition of the country's infrastructure.
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Suggested Citation

  • Clark, Ximena & Dollar, David & Micco, Alejandro, 2004. "Port efficiency, maritime transport costs, and bilateral trade," Journal of Development Economics, Elsevier, vol. 75(2), pages 417-450, December.
    • Handle: RePEc:eee:deveco:v:75:y:2004:i:2:p:417-450
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    References listed on IDEAS

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    1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    2. Glick, Reuven & Rose, Andrew K., 2002. "Does a currency union affect trade? The time-series evidence," European Economic Review, Elsevier, vol. 46(6), pages 1125-1151, June.
    3. Carsten Fink & Aaditya Mattoo & Ileana Cristina Neagu, 2002. "Trade in International Maritime Services: How Much Does Policy Matter?," World Bank Economic Review, World Bank Group, vol. 16(1), pages 81-108, June.
    4. Amjadi, Azita & Yeats, Alexander J., 1995. "Have transport costs contributed to the relative decline of sub-Saharan African exports? Some preliminary empirical evidence," Policy Research Working Paper Series 1559, The World Bank.
    5. Trujillo, Lourdes & Nombela, Gustavo, 1999. "Privatization and regulation of the seaport industry," Policy Research Working Paper Series 2181, The World Bank.
    6. Alberto F. Ades & Edward L. Glaeser, 1999. "Evidence on Growth, Increasing Returns, and the Extent of the Market," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 1025-1045.
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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