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Endogenous transportation costs

Jose Asturias

European Economic Review, 2020, vol. 123, issue C

Abstract: Quantitative trade models used to evaluate the effects of policy changes have largely abstracted away from modeling the transportation industry. This paper extends a standard Armington trade model to incorporate an oligopolistically competitive transportation industry in which shippers endogenously choose a transportation technology. I collect detailed data on the containerized maritime transportation industry to calibrate the parameters of the model. I then conduct quantitative experiments in which there is a symmetric increase in tariffs. On average, changes in transportation costs account for almost half of the changes in welfare. These findings suggest that the endogeneity of transportation costs is an important mechanism determining the welfare effects of such a policy change.

Keywords: Trade costs; Transportation costs; Trade liberalization (search for similar items in EconPapers)
JEL-codes: D43 F13 F15 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.euroecorev.2019.103366

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European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

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