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The Organization of International Trade

Dominik Boddin and Frank Stähler ()

No 7378, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper discusses how international trade is organized from export to trans-boundary transport to import. All evidence suggests that the transport sector is independent, may exercise market power and features strong economies of scale. We develop a model of a transport industry that operates under imperfect competition and economies of scale and two generic trade models in which export and import activities are either organized at arm’s length or in a vertical partnership. Using a large dataset of maritime transport costs, tariffs and export prices, we test the model predictions and find that economies of scale beat market power: a decline in the tariff implies a decline in freight rates. Furthermore, our results are consistent only with international trade being organized in vertical partnerships because a tariff increase does not lead to a decrease in export prices.

Keywords: trade costs; transport costs; export prices; vertical integration (search for similar items in EconPapers)
JEL-codes: F12 F14 R40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-geo, nep-int and nep-tre
Date: 2018
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