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Fly the unfriendly skies: The role of transport costs in gravity models of trade

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  • Besedeš, Tibor
  • Chu, Jing
  • Murshid, Antu Panini

Abstract

We exploit exogenous shocks to flight distances over time to estimate the distance effect in airborne trade within panel regressions. We find a negative distance effect, which we interpret as evidence of a link between transportation costs and airborne trade. Notably, this relationship is driven almost entirely by changes at the extensive margin. Specifically, trade in HS 6 product categories with intermittent trading histories becomes dormant when flight distances increase. Conversely, the intensive margin of trade remains largely unaffected.

Suggested Citation

  • Besedeš, Tibor & Chu, Jing & Murshid, Antu Panini, 2024. "Fly the unfriendly skies: The role of transport costs in gravity models of trade," Journal of International Economics, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:inecon:v:152:y:2024:i:c:s0022199624001211
    DOI: 10.1016/j.jinteco.2024.103994
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    More about this item

    Keywords

    Air cargo; Distance data; Geographic information systems; Gravity model; Natural experiment; Transportation costs;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East

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