Effects of Timeliness on the Trade Pattern

Suprabha Baniya, Purdue University

Abstract

Chapter 1 examines the trade effects of indirect time costs that are incurred while accessing the intermediate inputs. I construct indirect time costs using the U.S. input-output table and Hummels and Schaur (2013)’s calculations of consumers’ willingness to pay for faster delivery. I find that processed goods producers face significantly larger indirect time costs than do primary goods producers. Hence, countries with a greater ability to transport goods on time have a comparative advantage in goods that value timely delivery of inputs, and this trade pattern is stronger for processed goods. Countries’ physical geography features are used as instruments to address the endogeneity between trade and infrastructure. Chapter 2 examines the effect of timeliness on the extensive and intensive margins of trade using a computable general equilibrium (CGE) analysis. To do this, we use the GTAP firm-heterogeneity CGE model (Akgul et al., 2016) and implement the transport infrastructure reform as an efficiency change in the variable and fixed export costs using the econometric estimates of the two-part model in Baniya (2017). Implementing a targeted shock in the logistics performance index (partial equilibrium impacts) of South and East Asian region (low LPI) in the CGE model, we compare the resulting general equilibrium trade impacts across primary and processed goods that vary in terms of time sensitivity of inputs. Chapter 3 investigates the trade effects of the Belt and Road initiative of China combining geographical information systems (GIS) and econometric analysis. To do this, we compute the reduction in bilateral time to trade and potential substitution across transportation modes as a result of this infrastructure shock. We find that products that use time sensitive inputs, and countries that are highly exposed to the new infrastructure and integrated in the global production chains have larger trade gains. We use physical geography features of transit countries as instruments of the bilateral time to trade.

Degree

Ph.D.

Advisors

Hertel, Purdue University.

Subject Area

Economics

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