Clarifying trade costs: Maritime transport and its effect on agricultural trade

Greater attention has been given to trade costs in both the empirical trade literature and in theoretical models of international trade in recent years, with interest increasingly being directed towards the role of nonpolicy barriers such as transport costs. However, if distance is a proxy for transport and other trade costs, then the true effect of transport costs is impossible to determine. We attempt to remedy this by utilizing the newly compiled Organisation for Economic Co-operation and Development Maritime Transport Cost database to investigate the role that maritime freight costs play in determining ocean-shipped agricultural imports. We find that transport costs robustly and significantly negatively impact agricultural imports, even after controlling for shipping distance.Jane Korinek and Patricia Sourdi