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Entrepôt: Hubs, Scale, and Trade Costs

Author

Listed:
  • Sharat Ganapati
  • Woan Foong Wong
  • Oren Ziv

Abstract

We study the global trade network and quantify its trade and welfare impact. We document that the trade network is a hub-and-spoke system where 80% of trade is shipped indirectly, nearly all via entrepôts—major hubs that facilitate trade between many origins and destinations. We estimate indirect-shipping-consistent trade costs using a model where shipments can be sent indirectly through an endogenous transport network and develop a geography-based instrument to estimate scale economies in shipping. Network and scale effects propagate local trade cost changes globally. Counterfactual infrastructure improvements at entrepôts generate ten times the global welfare impact relative to non-entrepôts.

Suggested Citation

  • Sharat Ganapati & Woan Foong Wong & Oren Ziv, 2021. "Entrepôt: Hubs, Scale, and Trade Costs," NBER Working Papers 29015, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29015
    Note: ITI
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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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