Trade Effects of the New Silk Road: A Gravity Analysis

42 Pages Posted: 11 Jan 2019 Last revised: 1 Aug 2019

See all articles by Suprabha Baniya

Suprabha Baniya

Purdue University

Nadia Patrizia Rocha Gaffurri

World Bank

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

Date Written: January 10, 2019

Abstract

This paper takes a first look at the trade effects of China's Belt and Road Initiative, also referred to as the New Silk Road, on the 71 countries potentially involved. The initiative consists of several infrastructure investment projects to improve the land and maritime transportation in the Belt and Road Initiative region. The analysis first uses geo-referenced data and geographical information system analysis to compute the bilateral time to trade before and after the Belt and Road Initiative. Then, it estimates the effect of improvement in bilateral time to trade on bilateral export values and trade patterns, using a gravity model and a comparative advantage model. Finally, the analysis combines the estimates from the regression analysis with the results of the geographical information system analysis to quantify the potential trade effects of the Belt and Road Initiative. The paper finds that (i) the Belt and Road Initiative increases trade flows among participating countries by up to 4.1 percent; (ii) these effects would be three times as large on average if trade reforms complemented the upgrading in transport infrastructure; and (iii) products that use time sensitive inputs and countries that are highly exposed to the new infrastructure and integrated in global value chains have larger trade gains.

Keywords: International Trade and Trade Rules, Transport Services, Ports & Waterways, Energy and Environment, Energy Demand, Energy and Mining

Suggested Citation

Baniya, Suprabha and Rocha Gaffurri, Nadia Patrizia and Ruta, Michele, Trade Effects of the New Silk Road: A Gravity Analysis (January 10, 2019). World Bank Policy Research Working Paper No. 8694. Available at SSRN: https://ssrn.com/abstract=3313860

Suprabha Baniya (Contact Author)

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Nadia Patrizia Rocha Gaffurri

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Michele Ruta

Economic Research Division, WTO ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

HOME PAGE: http://www.iue.it/Personal/Fellows/MicheleRuta/Welcome.htm

Columbia Business School - Economics Department ( email )

420 West 118th Street
New York, NY 10027
United States

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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