The Round Trip Effect: Endogenous Transport Costs and International Trade

Woan Foong Wong

American Economic Journal: Applied Economics, 2022, vol. 14, issue 4, 127-66

Abstract: Container ships travel between a fixed set of origins and destinations in round trips, inducing a negative correlation in their freight rates. I study the implications of this round trip effect on international trade and trade policy. I identify this effect and develop an instrument using it to estimate the impact of transport costs on trade. I simulate counterfactual import tariff increases in a quantitative model and quantify the importance of endogenizing transport costs with respect to this effect: an exogenous transport costs model predicts a trade balance improvement from protectionist policies, while the round trip model finds the opposite.

JEL-codes: D22 F13 F14 L92 R41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (24)

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DOI: 10.1257/app.20190721

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