The Trade Reducing Effects of Market Power in International Shipping
Developing countries pay substantially higher transportation costs than developed nations, which leads to less trade and perhaps lower incomes. This paper investigates price discrimination in the shipping industry and the role it plays in determining transportation costs. In the presence of market power, shipping prices depend on the demand characteristics of goods being traded. We show theoretically and estimate empirically that shipping firms charge higher prices when transporting goods with higher product prices, lower import demand elasticities, and higher tariffs, and when facing fewer competitors on a trade route. These characteristics explain more variation in shipping prices than do conventional proxies such as distance, and significantly contribute to the higher shipping prices facing the developing world. Markups increase shipping prices by at least 83 percent for the mean shipment in Latin American imports. Our findings are also important for evaluating the impact of tariff liberalization. Shipping firms decrease prices by 1-2 percent for every 1 percent reduction in tariffs.
|Date of creation:||Feb 2007|
|Date of revision:|
|Publication status:||published as Hummels, David & Lugovskyy, Volodymyr & Skiba, Alexandre, 2009. "The trade reducing effects of market power in international shipping," Journal of Development Economics, Elsevier, vol. 89(1), pages 84-97, May.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Francois, Joseph F & Wooton, Ian, 2001.
"Trade in International Transport Services: The Role of Competition,"
Review of International Economics,
Wiley Blackwell, vol. 9(2), pages 249-61, May.
- Joseph Francois & Ian Wooton, 2000. "Trade in International Transport Services: The Role of Competition," Tinbergen Institute Discussion Papers 00-057/2, Tinbergen Institute.
- Francois, Joseph & Wooton, Ian, 2000. "Trade in International Transport Services: The Role of Competition," CEPR Discussion Papers 2377, C.E.P.R. Discussion Papers.
- David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
- Alexandre Skiba, 2007. "Regional Economies of Scale in Transportation and Regional Welfare," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200705, University of Kansas, Department of Economics, revised Sep 2007.
- Wilmsmeier, Gordon & Hoffmann, Jan & Sanchez, Ricardo J., 2006. "The Impact of Port Characteristics on International Maritime Transport Costs," Research in Transportation Economics, Elsevier, vol. 16(1), pages 117-140, January.
- Christian Broda & David E. Weinstein, 2006.
"Globalization and the Gains from Variety,"
The Quarterly Journal of Economics,
MIT Press, vol. 121(2), pages 541-585, May.
- David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," Econometric Society 2004 North American Summer Meetings 508, Econometric Society.
- Christian Broda & David E. Weinstein, 2004. "Globalization and the Gains from Variety," NBER Working Papers 10314, National Bureau of Economic Research, Inc.
- Christian Broda & David Weinstein, 2004. "Globalization and the gains from variety," Staff Reports 180, Federal Reserve Bank of New York.
- David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
- David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings 327, Econometric Society.
- Hummels, David, 2001.
"Time as a Trade Barrier,"
GTAP Working Papers
1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Stephen Redding & Anthony J. Venables, 2001.
"Economic Geography and International Inequality,"
- Redding, Stephen J. & Venables, Anthony J, 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers.
- Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers dp0495, Centre for Economic Performance, LSE.
- Stephen Redding & Anthony J. Venables, 2001. "Economic geography and international inequality," LSE Research Online Documents on Economics 3714, London School of Economics and Political Science, LSE Library.
- Carsten Fink & Aaditya Mattoo & Ileana Cristina Neagu, 2002.
"Trade in International Maritime Services: How Much Does Policy Matter?,"
World Bank Economic Review,
World Bank Group, vol. 16(1), pages 81-108, June.
- Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2001. "Trade in international maritime services : how much does policy matter?," Policy Research Working Paper Series 2522, The World Bank.
- Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
- repec:cup:cbooks:9780521804400 is not listed on IDEAS
- David Hummels & Alexandre Skiba, 2002.
"Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture,"
NBER Working Papers
9023, National Bureau of Economic Research, Inc.
- 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.
- Clark, Ximena & Dollar, David & Micco, Alejandro, 2004.
"Port efficiency, maritime transport costs, and bilateral trade,"
Journal of Development Economics,
Elsevier, vol. 75(2), pages 417-450, December.
- Ximena Clark & David Dollar & Alejandro Micco, 2004. "Port Efficiency, Maritime Transport Costs and Bilateral Trade," NBER Working Papers 10353, National Bureau of Economic Research, Inc.
- repec:cup:cbooks:9780521011143 is not listed on IDEAS
- Bruce A. Blonigen & Wesley Wilson, 2006. "New Measures of Port Efficiency Using International Trade Data," NBER Working Papers 12052, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12914. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.