Cabotage sabotage? The curious case of the Jones Act

This paper examines the economic implications of the Jones Act, which restricts domestic waterborne shipments to American vessels. Since the passage of this cabotage law a century ago, a plausibly exogenous rise in foreign competition has contributed to the closure of most American shipyards and to a decline in American-built ships. Thus, the Jones Act requirements have become more onerous over time. The results show that domestic shipments are less likely to be transported via water than imports of the same good into the same state. Exploiting the decline in Jones-Act-eligible vessels over time, additional results show that this cabotage law has disproportionately decreased domestic water trade especially in coastal states. These findings support common, but to date unverified, claims that the Jones Act impedes domestic trade.