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Freight Rates and the Margins of Intra-Latin American Maritime Trade

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Abstract

This paper focuses on the analysis of the relationship between maritime trade and transport cost in Latin America. The data available are disaggregated (SITC 5 digit level) maritime trade flows on trade routes within Latin America over the period 1999-2004. The contribution to the literature is to disentangle the effects that transport costs have on the extensive margin (number of products imported) and the intensive margin (quantity imported of each product) of international trade in order to test some of the predictions of the trade theories that introduce firm heterogeneity in productivity, as well as fixed costs of exporting. Recent investigations show that spatial frictions (distance) reduce trade mainly by reducing the number of shipments and that most firms ship only to geographically proximate customers, instead of shipping to many destinations in quantities that decrease in distance. Our findings confirm this result for intra-LA trade and show that the opposite pattern is observed for ad-valorem freight rates that reduce aggregate trade values mainly by reducing the quantity imported (intensive margin).

Suggested Citation

  • Inmaculada Martínez-Zarzoso & Gordon Wilmsmeier, 2010. "Freight Rates and the Margins of Intra-Latin American Maritime Trade," Ibero America Institute for Econ. Research (IAI) Discussion Papers 201, Ibero-America Institute for Economic Research.
  • Handle: RePEc:got:iaidps:201
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    File URL: http://www2.vwl.wiso.uni-goettingen.de/ibero/working_paper_neu/DB201.pdf
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    References listed on IDEAS

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    1. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    3. Ricardo J Sánchez & Jan Hoffmann & Alejandro Micco & Georgina V Pizzolitto & Martín Sgut & Gordon Wilmsmeier, 2003. "Port Efficiency and International Trade: Port Efficiency as a Determinant of Maritime Transport Costs," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 5(2), pages 199-218, June.
    4. Inmaculada Martinez-Zarzoso & Celestino Suarez-Burguet, 2005. "Transport costs and trade: Empirical evidence for Latin American imports from the European union," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(3), pages 353-371.
    5. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 43(3), pages 135-148, May.
    6. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
    7. I Martínez-Zarzoso & L García-Menéndez & C Suárez-Burguet, 2003. "Impact of Transport Costs on International Trade: The Case of Spanish Ceramic Exports," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 5(2), pages 179-198, June.
    8. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
    9. Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
    10. Don P. Clark, 2007. "Distance, production, and trade," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(3), pages 359-371.
    11. Inmaculada Martinez-Zarzoso & Felicitas D. Nowak-Lehmann, 2007. "Is distance a good proxy for transport costs? The case of competing transport modes," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(3), pages 411-434.
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    Cited by:

    1. Julia Spies & Joern Kleinert, 2011. "Transport Costs in International Trade," ERSA conference papers ersa11p625, European Regional Science Association.
    2. Joern Kleinert & Julia Spies, 2011. "Endogenous Transport Costs in International Trade," IAW Discussion Papers 74, Institut für Angewandte Wirtschaftsforschung (IAW).

    More about this item

    Keywords

    Transport costs; Maritime trade; Latin America; Sectoral data; Competitiveness;

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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