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Infrastructure, geographical disadvantage, and transport costs

  • Limao, Nuno
  • Venables, Anthony J.

The authors use three different data sets to investigate how transport depends on geography and infrastructure. Landlocked countries have high transport costs, which can be substantially reduced by improving the quality of their infrastructure and that of transit countries. Analysis of bilateral trade data confirms the importance of infrastructure. The authors estimate the elasticity of trade flows with regard to transport costs to be high, at about -2.5. This means that: 1) The median landlocked country has only 30 percent of the trade volume of the median coastal economy. 2) Halving transport costs increases the volume of trade by a factor of five. 3) Improving infrastructure from the 75th to the 50th percentile increases trade by 50 percent. Using their results and a basic gravity model to study Sub-Saharan African trade, both internally and with the rest of the world, the authors find that infrastructure problems largely explain the relatively low levels of African trade.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2257.

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Date of creation: 31 Dec 1999
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Handle: RePEc:wbk:wbrwps:2257
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  1. Amjadi, Azita & Reinke, Ulrich & Yeats, Alexander, 1996. "Did external barriers cause the marginalization of sub-Saharan Africa in world trade?," Policy Research Working Paper Series 1586, The World Bank.
  2. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics.
  3. Geraci, Vincent J & Prewo, Wilfried, 1977. "Bilateral Trade Flows and Transport Costs," The Review of Economics and Statistics, MIT Press, vol. 59(1), pages 67-74, February.
  4. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  5. Bougheas, Spiros & Demetriades, Panicos O. & Morgenroth, Edgar L. W., 1999. "Infrastructure, transport costs and trade," Journal of International Economics, Elsevier, vol. 47(1), pages 169-189, February.
  6. Foroutan, Faezeh & Pritchett, Lant, 1993. "Intra - Sub - Saharan African trade : is it too little?," Policy Research Working Paper Series 1225, The World Bank.
  7. Wang, Z.K. & Winters, L.A., 1992. "The Trading Potential of Eastern Europe," Discussion Papers 92-21, Department of Economics, University of Birmingham.
  8. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-21, May.
  9. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
  10. Amjadi, A. & Reincke, U. & Yeats, A.J., 1996. "Did External Barriers Cause the Marginalization of Sub-Saharan Africa in World Trade," World Bank - Discussion Papers 348, World Bank.
  11. Soloaga, Isidro & Winters, L. Alan, 1999. "Regionalism in the Nineties: What Effect on Trade?," CEPR Discussion Papers 2183, C.E.P.R. Discussion Papers.
  12. Finger, J M & Yeats, Alexander J, 1976. "Effective Protection by Transportation Costs and Tariffs: A Comparison of Magnitudes," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 169-76, February.
  13. Dani Rodrik, 1998. "Trade Policy and Economic Performance in Sub-Saharan Africa," NBER Working Papers 6562, National Bureau of Economic Research, Inc.
  14. Coe, David T & Hoffmaister, Alexander W, 1999. "North-South Trade: Is Africa Unusual?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(2), pages 228-56, July.
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