Transportation System and Trade Flows in Port Cities of China: A Random Coefficient Model

Xu Lizhi, Fang Shu-Cherng, Lai Kin Keung, Qiao Han () and Wang Shouyang
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Xu Lizhi: School of Economics and Management, University of Chinese Academy of Sciences, Beijing100190, China
Fang Shu-Cherng: Department of Industrial Engineering, North Carolina State University, Raleigh, NC 27695, USA
Lai Kin Keung: Department of Management Sciences, City University of Hong Kong, Hong Kong, China
Qiao Han: School of Economics and Management, University of Chinese Academy of Sciences, Beijing100190, China
Wang Shouyang: Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing100190, China

Journal of Systems Science and Information, 2015, vol. 3, issue 4, 289-300

Abstract: This paper quantitatively investigates the effect of transportation system on trade flows of four major port cities in China. Due to the significant country-pair heterogeneities in both intercept and slope terms, this paper introduced a random-coefficients model for parameters estimation. The empirical findings imply that the impact of the explanatory variables included in the gravity equation could be inaccurately estimated if the pair-wise heterogeneity biases in both intercept and slope terms are not accounted for during the econometric estimation of the model. In particular, in the presence of this heterogeneity, parameter estimates tend to be underestimated for country-pairs with higher trade volume and overestimated for those country-pairs with lower trade volume. In addition, the empirical results suggest that the improvement transportation system in port cities of China offers greater scope for its trade competitiveness.

Keywords: gravity model; random coefficient model; bilateral trade flows; port city (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:3:y:2015:i:4:p:289-300:n:1

DOI: 10.1515/JSSI-2015-0289

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