Investment in Infrastructure and Trade: The Case of Ports

Giulia Brancaccio (), Myrto Kalouptsidi () and Theodore Papageorgiou
Additional contact information
Giulia Brancaccio: New York University
Myrto Kalouptsidi: Harvard University

No 1072, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Transportation infrastructure is vital for the smooth functioning of international trade. Ports are a crucial gateway to this system: with more than 80% of trade carried by ships, they shape trade costs, and it is critical that they operate efficiently. Yet ports are susceptible to disruptions, causing costly delays. With enormous budgets spent on infrastructure to alleviate these costs, a key policy question emerges: in a world with high volatility, what are the returns to investing in infrastructure? To address this question, we introduce an empirical framework that combines insights from queueing theory to capture port technology, with tools from demand estimation. We use our framework, together with a collection of novel datasets, to quantify the costs of disruptions and evaluate transportation infrastructure investment. Our analysis unveils three policy-relevant messages: (i) investing in port infrastructure can lead to substantial trade and welfare gains, but only if targeted properly– in fact, net of costs, investment has positive returns at a minority of US ports; (ii) there are sizable spillovers across ports, as investing in one port can decongest a wider set of ports, suggesting that decision-making should not be decentralized to local authorities; (iii) macroeconomic volatility can drastically change returns to investment and their geography.

Keywords: transportation; infrastructure; ports; congestion; macroeconomic volatility; disruptions; spillovers; welfare (search for similar items in EconPapers)
JEL-codes: E39 F1 F14 L0 L90 L91 R4 R41 R42 (search for similar items in EconPapers)
Date: 2024-05-10
New Economics Papers: this item is included in nep-int, nep-inv, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Investment in Infrastructure and Trade: The Case of Ports (2024)
Working Paper: Investment in Infrastructure and Trade: The Case of Ports (2024)
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