The Organization of International Trade

48 Pages Posted: 21 Feb 2019

See all articles by Dominik Boddin

Dominik Boddin

Deutsche Bundesbank - Deutsche Bundesbank Research Data and Service Centre

Frank Stähler

University of Tuebingen - Department of Economics; University of Adelaide - School of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 2018

Abstract

This paper discusses how international trade is organized from export to trans-boundary transport to import. All evidence suggests that the transport sector is independent, may exercise market power and features strong economies of scale. We develop a model of a transport industry that operates under imperfect competition and economies of scale and two generic trade models in which export and import activities are either organized at arm’s length or in a vertical partnership. Using a large dataset of maritime transport costs, tariffs and export prices, we test the model predictions and find that economies of scale beat market power: a decline in the tariff implies a decline in freight rates. Furthermore, our results are consistent only with international trade being organized in vertical partnerships because a tariff increase does not lead to a decrease in export prices.

Keywords: trade costs, transport costs, export prices, vertical integration

JEL Classification: F120, F140, R400

Suggested Citation

Boddin, Dominik and Stähler, Frank, The Organization of International Trade (2018). Available at SSRN: https://ssrn.com/abstract=3338707 or http://dx.doi.org/10.2139/ssrn.3338707

Dominik Boddin (Contact Author)

Deutsche Bundesbank - Deutsche Bundesbank Research Data and Service Centre ( email )

Wilhelm-Epstein-Straße 14
Frankfurt am Main, 60431
Germany

Frank Stähler

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

HOME PAGE: http://www.frank-staehler.de

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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