Global Logistics Indicators, Supply Chain Metrics, and Bilateral Trade Patterns

29 Pages Posted: 14 Dec 2005

See all articles by Warren H. Hausman

Warren H. Hausman

Stanford Graduate School of Business

Hau L. Lee

Stanford Graduate School of Business

Uma Subramanian

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Date Written: November 2005

Abstract

Past research into the determinants of international trade highlighted the importance of the basic spatial gravity model augmented by additional variables representing sources of friction. Studies modeled many sources of friction using various proxies, including indices based on expert judgment in some cases. This paper focuses on logistics friction and draws on a data set recently compiled by the World Bank with specific quantitative metrics of logistics performance in terms of time, cost, and variability in time. It finds that the new variables that relate directly to logistics performance have a statistically significant relationship with the level of bilateral trade. It also finds that a single logistics index can capture virtually all of the explanatory power of multiple logistics indicators. The findings should spur public and private agencies that have direct or indirect power over logistics performance to focus attention on reducing sources of friction so as to improve their country's ability to compete in today's global economy. Moreover, since the logistics metrics are directly related to operational performance, countries can use these metrics to target actions to improve logistics and monitor their progress.

Suggested Citation

Hausman, Warren H. and Lee, Hau L. and Subramanian, Uma, Global Logistics Indicators, Supply Chain Metrics, and Bilateral Trade Patterns (November 2005). World Bank Policy Research Working Paper No. 3773, Available at SSRN: https://ssrn.com/abstract=869999 or http://dx.doi.org/10.2139/ssrn.869999

Warren H. Hausman (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Hau L. Lee

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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