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How much will the Belt and Road Initiative reduce trade costs?

Author

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  • de Soyres, François
  • Mulabdic, Alen
  • Murray, Siobhan
  • Rocha, Nadia
  • Ruta, Michele

Abstract

This paper studies the impact of transport infrastructure projects of the Belt and Road Initiative on shipment times and trade costs. Based on a new data on completed and planned Belt and Road transport projects, Geographic Information System analysis is used to estimate shipment times before and after the Belt and Road Initiative. Two sets of data are computed to address different research questions: a global database based on an analysis of 1000 cities in 191 countries and 47 sectors and a regional database that focuses on more granular information (1818 cities) for Belt and Road economies only. The paper uses sectoral estimates of “value of time” to transform changes in shipment times into changes in ad valorem trade costs at the country-sector level. The findings show that the Belt and Road Initiative will significantly reduce shipment times and trade costs. For the world, the average reduction in shipment time will range between 1.2 and 2.5 percent, leading to reduction of aggregate trade costs between 1.1 and 2.2 percent. For Belt and Road economies, the change in shipment times and trade costs will range between 1.7 and 3.2 percent and 1.5 and 2.8 percent, respectively. Belt and Road economies located along the corridors where projects are built experience the largest gains. Shipment times along these corridors decline by up to 11.9 percent and trade costs by up to 10.2 percent.

Suggested Citation

  • de Soyres, François & Mulabdic, Alen & Murray, Siobhan & Rocha, Nadia & Ruta, Michele, 2019. "How much will the Belt and Road Initiative reduce trade costs?," International Economics, Elsevier, vol. 159(C), pages 151-164.
    • Handle: RePEc:eee:inteco:v:159:y:2019:i:c:p:151-164
    DOI: 10.1016/j.inteco.2019.07.003
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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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