Firms’ Transport Mode Choices in International Trade

This paper studies the determinants of exporters’ transport mode choices by combining a simple calibrated model of a profit-maximizing firm with a conditional logit econometric exercise based on very detailed international trade data for Portuguese firms. The paper considers three transport modes – sea, road, and air – and data for the period between 2012 and 2023. The database signals that road transport dominates on short distances, whereas sea and air are preferred for longer routes. Results from model calibration indicate that, for some product–transport mode combinations, longer transit times substantially reduce profits, thus increasing the likelihood of switching transport modes. Empirical results state that the probability of selecting a mode is lower when either transit time or transport costs increase. Product bulkiness, degree of perishability and technological content also affect transport mode selection. In addition, higher unit prices of exported goods shift firms away from sea transport and towards air transport. Simulation exercises using estimated coefficients indicate that a closure of the Suez Canal sizably reduces the probability of choosing a maritime route to Asia, while a one order increase in the price of CO2 emissions would not materially alter the choice of transport mode.