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Impacts of trade facilitation on modal choice and international trade flows

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  • Avetisyan, Misak
  • Hertel, Thomas

Abstract

Over the last decade, the use of air transport to facilitate global merchandise trade has grown significantly, driven by the increasing demand for ‘just in time’ delivery of intermediate goods as well as due to the growing importance of trade between more distant countries. In this paper we analyze the effect of improved global logistics and trade facilitation on transport mode choice in international trade using the Global Trade Analysis Project (GTAP) model of global trade which we modify to incorporate modal choice. To parameterize this model, we develop a continuous modal choice model and estimate the associated elasticities of substitution between transport modes. We find that modal substitution elasticities have values ranging from 0.57 to 2.14, indicating significant response to changes in the relative cost of different modes of goods transport. The quality of logistics infrastructure is also found to influence modal choice in international trade with improved logistics performance generally leading to increased reliance on air transportation.

Suggested Citation

  • Avetisyan, Misak & Hertel, Thomas, 2021. "Impacts of trade facilitation on modal choice and international trade flows," Economics of Transportation, Elsevier, vol. 28(C).
    • Handle: RePEc:eee:ecotra:v:28:y:2021:i:c:s221201222100040x
    DOI: 10.1016/j.ecotra.2021.100236
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    2. Victor Ushahemba Ijirshar, 2022. "Trade Facilitation and Economic Growth Among Middle-Income Countries," Papers 2204.11088, arXiv.org.

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