Geography, Search Frictions and Endogenous Trade Costs / Giulia Brancaccio, Myrto Kalouptsidi, Theodore Papageorgiou.

Format:

Book

Author/Creator:

Brancaccio, Giulia.

Contributor:

National Bureau of Economic Research.

Kalouptsidi, Myrto.

Papageorgiou, Theodore.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23581.

NBER working paper series no. w23581

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

In this paper we study the role of the transportation sector in world trade. We build a spatial model that centers on the interaction of the market for (oceanic) transportation services and the market for world trade in goods. The model delivers equilibrium trade flows, as well as equilibrium trade costs (shipping prices). Using detailed data on vessel movements and shipping prices, we document novel facts about shipping patterns; we then flexibly estimate our model. We use this setup to demonstrate that the transportation sector (i) implies that net exporters (importers) face higher (lower) trade costs leading to misallocation of productive activities across countries; (ii) creates network effects in trade costs; and (iii) dampens the impact of shocks on trade flows. These three mechanisms reveal a new role for geography in international trade that was previously concealed by the common assumption of exogenous trade costs. Finally, we illustrate how our setup can be used for policy analysis by evaluating the impact of future and existing infrastructure projects (e.g. Northwest Passage, Panama Canal).

Notes:

Print version record

July 2017.