Trade Logistics – the Gravity Model Approach

Abstract

Over the past decade, a number of papers attempt to capture the decisive impact of trade facilitation on international trade. Since the emergence of trade liberalization and tarrif reduction, trade facilitation analysis has been put in the spotlight. Trade facilitation is defined as all measures that reduce trade costs other than lowering tariffs. Therefore, the aim of this paper is to empirically examine the impact of trade facilitation from the logistics perspective on international trade distinguishing between low, middle and high income importing countries. We used the augmented gravity model to estimate this relationship across 150 countries within the period 2007-2016. The Logistic Performance Index (LPI) created by the World Bank is used as a proxy variable for trade facilitation. The results of our analysis show that all used variables are significant and show the expected signs correspondingly to our hypotheses, suggesting that trade will increase with trade facilitation. The results also lead to the conclusion that exporter logistics performance seems to be more important than importer logistics performance. This paper supports the World Bank trade facilitation initiatives to assure lower trade costs as they serve as a barrier to enjoying the benefits of increased trade.

The effects of logistics performance on international trade: EU15 vs CEMS

“…Their findings confirm that trade patterns differ for different types of products, namely parts, components, and final goods and that all EU countries are active through all supply chain, however while developed countries trade mostly with other developed countries, less developed EU countries trade with more developed countries. Latest findings of Gani (2017) and Host et al (2019) estimate the effects of logistics performance on international trade using cross-country data for a large sample of countries and both agree that logistics performance have statistically significant and positive effect on trade flows, particularly on exports. In addition, Bugar ci c et al (2020) analyse the impact of logistics performance on trade volume within two groups of countries, Central and Eastern European and Western Balkan countries, and conclude that subindices international shipments, logistic quality and competence and tracking and tracing have the highest effects on trade volume in observed year 2018.…”

“…In our research, the theoretical framework to investigate the effects of logistics service performance on international trade is based on the gravity model theory of international trade. Since the pioneer work of Tinbergen (1962), the gravity equations have been frequently used in many trade related research papers during decades (Anderson & van Wincoop, 2004;Behar & Manners, 2008;Bergstrand, 1985Bergstrand, , 1989Frede & Yetkiner, 2017;Host et al, 2019;Krugman, 1991;Zajc Kej zar et al, 2016). We develop the following structural gravity model to estimate the effects of logistics performance differences between trading partners on bilateral trade:…”

Assessing the Effects of Logistics Performance on Energy Trade

“…However, in the majority of empirical studies, the gravity model usually incorporates other socio-economic variables, such as common language, border, currency, or colonial history, between trading partners. Since the first report on the logistics performance index in 2007, published by the World Bank, many authors interested in trade logistics and trade facilitation have started to include the logistics performance index in their gravity model [11,20,[33][34][35].…”

Maritime Transportation Dynamics in the Azores Region: Analyzing the Period 1998–2019

“…Although this research extends the experience and knowledge about the main accessibility issues in some insular areas, as is the case of the Azores Islands, substantial opportunities for prospective studies are still required. In fact, to have a comprehensive understanding of all these maritime transportation and efficiency issues in ultra-peripheral territories, we should consider several other factors, besides the ones studied in this article, which might affect traveling trade, the importance of port infrastructure or other activities that could be found in some recent research papers (see: [32,33]). Moreover, for future research, it is also possible to perform correlations related to specific factors which might be necessary for traveling patterns towards the islands-i.e., demography or economy are just a few examples.…”