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The Organization of International Trade

Author

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  • Dominik Boddin
  • Frank Stähler

Abstract

This paper discusses how international trade is organized from export to trans-boundary transport to import. All evidence suggests that the transport sector is independent, may exercise market power and features strong economies of scale. We develop a model of a transport industry that operates under imperfect competition and economies of scale and two generic trade models in which export and import activities are either organized at arm’s length or in a vertical partnership. Using a large dataset of maritime transport costs, tariffs and export prices, we test the model predictions and find that economies of scale beat market power: a decline in the tariff implies a decline in freight rates. Furthermore, our results are consistent only with international trade being organized in vertical partnerships because a tariff increase does not lead to a decrease in export prices.

Suggested Citation

  • Dominik Boddin & Frank Stähler, 2018. "The Organization of International Trade," CESifo Working Paper Series 7378, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_7378
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    More about this item

    Keywords

    trade costs; transport costs; export prices; vertical integration;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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