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Domestic Road Infrastructure and International Trade: Evidence from Turkey

  • A. Kerem Cosar

    ()

    (University of Chicago, Booth School of Business)

  • Banu Demir

    ()

    (Bilkent University, Department of Economics)

Poor domestic transportation infrastructure in developing countries is often cited as an important impediment for accessing international markets. Yet, evidence on how transportation infrastructure improvements affect the volume and composition of exports is scarce. Drawing on the large-scale public investment in expressways undertaken in Turkey during the 2000s, this paper contributes to our understanding of how internal trade costs affect regional exports and specialization. Two results emerge. First, we estimate that this road infrastructure project accounts for 15 percent of the export increase from interior regions, generating a 10-year discounted stream of additional export revenues that amount to between 9 and 14 percent of the value of the investment. Second, while the exports of all industries within a given region increase in response to improvements in connectivity to the international gateways of the country, the magnitude of this increase is larger the more time sensitive an industry is. Accordingly, we also observe an increase in the regional employment and revenue shares of such industries. Our results support the hypothesis that internal trade costs can be a determinant of international specialization and comparative advantage.

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File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1406.pdf
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Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1406.

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Length: 36 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:koc:wpaper:1406
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  1. Christian Volpe Martincus & Juan S. Blyde, 2012. "Shaky Roads and Trembling Exports: Assessing the Trade Effects of Domestic Infrastructure Using a Natural Experiment," IDB Publications (Working Papers) 82533, Inter-American Development Bank.
  2. Jennifer Abel-Koch, . "Who uses intermediaries in international trade? Evidence from firm-level survey data," Discussion Papers 11/25, University of Nottingham, GEP.
  3. Gilles Duranton & Peter Morrow & Matthew Turner, 2013. "Roads and Trade: Evidence from the U.S," Working Papers tecipa-479, University of Toronto, Department of Economics.
  4. Harrigan, James, 2010. "Airplanes and comparative advantage," Journal of International Economics, Elsevier, vol. 82(2), pages 181-194, November.
  5. Carolyn L. Evans & James Harrigan, 2005. "Distance, Time, and Specialization: Lean Retailing in General Equilibrium," American Economic Review, American Economic Association, vol. 95(1), pages 292-313, March.
  6. Donald J. Rousslang & Theodore To, 1993. "Domestic Trade and Transportation Costs as Barriers to International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 208-21, February.
  7. John G. Fernald, 1999. "Roads to Prosperity? Assessing the Link between Public Capital and Productivity," American Economic Review, American Economic Association, vol. 89(3), pages 619-638, June.
  8. Juan Blyde, 2013. "Paving the Road to Export: Assessing the Trade Impact of Road Quality," International Economic Journal, Taylor & Francis Journals, vol. 27(4), pages 663-681, December.
  9. David L. Hummels & Georg Schaur, 2013. "Time as a Trade Barrier," American Economic Review, American Economic Association, vol. 103(7), pages 2935-59, December.
  10. Treb Allen & Costas Arkolakis, 2013. "Trade and the Topography of the Spatial Economy," NBER Working Papers 19181, National Bureau of Economic Research, Inc.
  11. Dave Donaldson & Richard Hornbeck, 2013. "Railroads and American Economic Growth: A "Market Access" Approach," NBER Working Papers 19213, National Bureau of Economic Research, Inc.
  12. A. Kerem Coşar & Pablo D. Fajgelbaum, 2013. "Internal Geography, International Trade, and Regional Specialization," NBER Working Papers 19697, National Bureau of Economic Research, Inc.
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