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Investment in Infrastructure and Trade: The Case of Ports

Author

Listed:
  • Brancaccio, Giulia
  • Kalouptsidi, Myrto
  • Papageorgiou, Theodore
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.

Suggested Citation

  • Brancaccio, Giulia & Kalouptsidi, Myrto & Papageorgiou, Theodore, 2024. "Investment in Infrastructure and Trade: The Case of Ports," CEPR Discussion Papers 19098, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19098
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    References listed on IDEAS

    as
    1. Woan Foong Wong, 2022. "The Round Trip Effect: Endogenous Transport Costs and International Trade," American Economic Journal: Applied Economics, American Economic Association, vol. 14(4), pages 127-166, October.
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    Cited by:

    1. Barthélémy Bonadio, 2024. "Ports vs. Roads: Infrastructure, Market Access and Regional Outcomes," CESifo Working Paper Series 11383, CESifo.

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

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