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Title:Freight rates and the margins of intra-Latin American maritime trade PDF Logo
Authors:Martínez-Zarzoso, Inmaculada
Wilmsmeier, Gordon
Issue Date:2010
Series/Report no.:Discussion papers, Ibero America Institute for Economic Research 201
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).
Subjects:Transport costs
Maritime trade
Latin America
Sectoral data
Competitiveness
JEL:F10
Document Type:Working Paper
Appears in Collections:Discussion Papers, IAI, Universität Göttingen

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