Exports and International Logistics
Do better international logistics reduce trade costs, raising a developing country's exports? Yes, but the magnitude of the effect depends on the country's size. The authors apply a gravity model that accounts for firm heterogeneity and multilateral resistance to a comprehensive new international logistics index. A one-standard deviation improvement in logistics is equivalent to a 14 percent reduction in distance. An average-sized developing country would raise exports by about 36 percent. Most countries are much smaller than average however, so the typical effect is 8 percent. This difference is chiefly due to multilateral resistance: it is bilateral trade costs relative to multilateral trade costs that matter for bilateral exports, and multilateral resistance is more important for small countries.
Summary: | Do better international logistics reduce
trade costs, raising a developing country's exports?
Yes, but the magnitude of the effect depends on the
country's size. The authors apply a gravity model that
accounts for firm heterogeneity and multilateral resistance
to a comprehensive new international logistics index. A
one-standard deviation improvement in logistics is
equivalent to a 14 percent reduction in distance. An
average-sized developing country would raise exports by
about 36 percent. Most countries are much smaller than
average however, so the typical effect is 8 percent. This
difference is chiefly due to multilateral resistance: it is
bilateral trade costs relative to multilateral trade costs
that matter for bilateral exports, and multilateral
resistance is more important for small countries. |
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