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Backfiring with Backhaul Problems: Trade and Industrial Policies with Endogenous Transport Costs

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  • ISHIKAWA, Jota
  • 石川, 城太
  • TARUI, Nori

Abstract

Trade barriers due to transport costs are as large as those due to tariffs. This paper incorporates the transport sector into a standard model of international trade and studies the effects of trade and industrial policies. Transport firms need to commit to a shipping capacity sufficient for a round trip, with a possible imbalance of shipping volumes in two directions. This imbalance is known as the “backhaul problem.” As transport firms attempt to avoid this problem, a tariff in one sector may affect other independent import and/or export sectors. In particular, domestic tariffs may backfire: domestic exports may also decrease, harming domestic export sectors and the domestic economy. This finding contributes to the literature on how import liberalization may generate a positive effect on the liberalizing country’s exports by identifying a new channel through endogenous changes in transport costs given the backhaul problem.

Suggested Citation

  • ISHIKAWA, Jota & 石川, 城太 & TARUI, Nori, 2017. "Backfiring with Backhaul Problems: Trade and Industrial Policies with Endogenous Transport Costs," Discussion paper series HIAS-E-57, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
  • Handle: RePEc:hit:hiasdp:hias-e-57
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    References listed on IDEAS

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    Cited by:

    1. Kalouptsidi, Myrto & Papageorgiou, Theodore & Brancaccio, Giulia, 2017. "Geography, Search Frictions and Endogenous Trade Costs," CEPR Discussion Papers 12141, C.E.P.R. Discussion Papers.
    2. Kangsik Choi & Seonyoung Lim, 2018. "Tariff protection and port privatization: An import-competing approach," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 20(2), pages 228-252, June.
    3. Ishikawa, Jota & Tarui, Nori, 2018. "Backfiring with backhaul problems," Journal of International Economics, Elsevier, vol. 111(C), pages 81-98.
    4. Takauchi, Kazuhiro, 2015. "Transport efficiency, downstream R&D, and spillovers," MPRA Paper 68479, University Library of Munich, Germany.
    5. Hayakawa, Kazunobu & Ishikawa, Jota & Tarui, Nori, 2020. "What goes around comes around: Export-enhancing effects of import-tariff reductions," Journal of International Economics, Elsevier, vol. 126(C).
    6. Lutz Kilian & Nikos Nomikos & Xiaoqing Zhou, 2023. "Container Trade and the U.S. Recovery," International Journal of Central Banking, International Journal of Central Banking, vol. 19(1), pages 417-450, March.
    7. ISHIKAWA, Jota & 石川, 城太 & TARUI, Nori & 樽井, 礼, 2015. "Backfiring with backhaul problems: Trade and Industrial Policies with Endogenous Transport Costs," Discussion paper series HIAS-E-12, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    8. Takauchi, Kazuhiro, 2016. "Profit-reducing fixed-price contract: The role of the transport sector," MPRA Paper 71413, University Library of Munich, Germany.
    9. Dominik Boddin & Frank Stähler, 2018. "The Organization of International Trade," CESifo Working Paper Series 7378, CESifo.
    10. DongJoon Lee & Seonyoung Lim & Kangsik Choi, 2017. "Port privatization under Cournot vs. Bertrand competition: a third-market approach," Maritime Policy & Management, Taylor & Francis Journals, vol. 44(6), pages 761-778, August.
    11. Giulia Brancaccio & Myrto Kalouptsidi & Theodore Papageorgiou, 2020. "Geography, Transportation, and Endogenous Trade Costs," Econometrica, Econometric Society, vol. 88(2), pages 657-691, March.
    12. Takauchi, Kazuhiro & Mizuno, Tomomichi, 2019. "Solving a hold-up problem may harm all firms: Downstream R&D and transport-price contracts," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 29-49.
    13. Ishikawa, Jota & Tarui, Nori, 2021. "You can’t always get what you want: Protectionist policies with the transport sector," Economics Letters, Elsevier, vol. 207(C).

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    More about this item

    Keywords

    Transport sector; transport cost; backhaul problems; international shipping; tariffs;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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