Freight Rates and the Margins of Intra-Latin American Maritime Trade

Inmaculada Martínez-Zarzoso and Gordon Wilmsmeier

No 201, Ibero America Institute for Econ. Research (IAI) Discussion Papers from Ibero-America Institute for Economic Research

Abstract: This paper focuses on the analysis of the relationship between maritime trade and transport cost in Latin America. The data available are disaggregated (SITC 5 digit level) maritime trade flows on trade routes within Latin America over the period 1999-2004. The contribution to the literature is to disentangle the effects that transport costs have on the extensive margin (number of products imported) and the intensive margin (quantity imported of each product) of international trade in order to test some of the predictions of the trade theories that introduce firm heterogeneity in productivity, as well as fixed costs of exporting. Recent investigations show that spatial frictions (distance) reduce trade mainly by reducing the number of shipments and that most firms ship only to geographically proximate customers, instead of shipping to many destinations in quantities that decrease in distance. Our findings confirm this result for intra-LA trade and show that the opposite pattern is observed for ad-valorem freight rates that reduce aggregate trade values mainly by reducing the quantity imported (intensive margin).

Keywords: Transport costs; Maritime trade; Latin America; Sectoral data, Competitiveness (search for similar items in EconPapers)
JEL-codes: F10 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-02-16
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:got:iaidps:201

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