Advertisement

Journal of Systems Science and Complexity

, Volume 30, Issue 6, pp 1403–1424 | Cite as

A study on transport costs and China’s Exports: An extended gravity model

  • Lizhi Xu
  • Kin Keung Lai
  • Han QiaoEmail author
  • Shouyang Wang
Article

Abstract

This paper suggests an extending conventional gravity model design to empirically analyze the effect of transport costs and port efficiency on China’s export flows. It shows that factor endowment and transport costs variables affect export trade value in directions that New Trade Theory (NTT) predicted. Also, the evidence indicates that, controlling for the effects of transport costs on trade, variables in traditional gravity model are consistent with previous empirical studies in both magnitudes and directions. Moreover, more than 22% of the variation in Chinese export trade can be explained by those three variables alone. The findings reported in this paper empirically explains how seriously transport costs and port efficiency affect China’s export growth by comparing effects of labour production factor costs on external trade. It suggests that the improvement of port efficiency and reduction of road transport costs play a vital role in China’s export competitiveness in the global market.

Keywords

Extended gravity model transport costs port efficiency manufacturing base processing center 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Notes

Acknowledgements

The authors are very grateful to Prof. FANG Shu-Cherng of North Carolina State University, USA for his advice and help in research and writing of this paper.

References

  1. [1]
    Krugman P R, Obstfeld M, and Melitz M J, International Economics: Theory & Policy, Addison-Wesley, 2012.Google Scholar
  2. [2]
    World Trade Organization, International Trade Statistics, Geneva, WTO, 2009.Google Scholar
  3. [3]
    Ge Y, Globalization and industry agglomeration in China, World Development, 2009, 37(3): 550–559.MathSciNetCrossRefGoogle Scholar
  4. [4]
    China Logistics Association and China Federation of Logistics and Purchasing, China Logistics Academy Frontier Report, Beijing, China Logistics Publishing House, 2006.Google Scholar
  5. [5]
    Hummels D, Transportation costs and international trade in the second era of globalization, The Journal of Economic Perspectives, 2007, 21(3): 131–154.CrossRefGoogle Scholar
  6. [6]
    Limao N and Venables A J, Infrastructure, geographical disadvantage and transport costs, The World Bank Economic Review, 2001, 15(3): 451–479.CrossRefGoogle Scholar
  7. [7]
    Hui E C M, Ng M H, Xu J J, et al., The cargo throughput response to factor cost differentials: An analysis for the port of Hong Kong, Transportmetrica, 2010, 6(4): 235–248.CrossRefGoogle Scholar
  8. [8]
    Hayami Y, Development Economics: From the Poverty to the Wealth of Nations, Oxford University Press, Oxford, 2001.CrossRefGoogle Scholar
  9. [9]
    Irwin D A and Terviö M, Does trade raise income? Evidence from the twentieth century, Journal of International Economics, 2002, 58: 1–18.CrossRefGoogle Scholar
  10. [10]
    Korinek J and Sourdin P, Clarifying trade costs: Maritime transport and its effect on agricultural trade, Applied Economic Perspectives and Policy, 2010, 32(3): 417–435.CrossRefGoogle Scholar
  11. [11]
    Fink C, Matoo A, and Neagu C I, Trade in international maritime services: How much does policy matter?, World Bank Economic Review, 2002, 16(1): 81–108.CrossRefGoogle Scholar
  12. [12]
    Iwanow T and Kirkpatrick C, Trade facilitation and manufactured exports: Is Africa different?, World Development, 2009, 37(6): 1039–1050.CrossRefGoogle Scholar
  13. [13]
    Wilson J S, Mann C L, and Otsuki T, Trade facilitation and economic development: A new approach to quantifying the impact, The World Bank Economic Review, 2003, 17(3): 367–389.CrossRefGoogle Scholar
  14. [14]
    Clark X, Dollar D, and Micco A, Port efficiency, maritime transport costs and bilateral trade, NBER working paper No. 10353, Cambridge, MA, 2004.CrossRefGoogle Scholar
  15. [15]
    Blonigen B A and Wilson W W, New measures of port efficiency using international trade data, NBER working paper No. 12052, 2006a.CrossRefGoogle Scholar
  16. [16]
    Blonigen B A and Wilson W W, International trade, transportation networks and port choice, Transportation Journal, 2006b, 34: 32–47.Google Scholar
  17. [17]
    De P and Rout B, Transportation cost and trade competitiveness: Empirical evidence from India, Trade and Development Review, 2008, 1(2): 95–121.Google Scholar
  18. [18]
    Tinbergen J, Shaping the World Economy, Twentieth Century Fund, New York, 1962.Google Scholar
  19. [19]
    Baier S L and Bergstrand J H, Do free trade agreements actually increase members’ international trade?, Journal of International Economics, 2007, 71(1): 72–95.CrossRefGoogle Scholar
  20. [20]
    Egger P and Larch M, Interdependent preferential trade agreement memberships: an empirical analysis, Journal of International Economics, 2008, 76(2): 384–399.CrossRefGoogle Scholar
  21. [21]
    Anderson J E and Wincoop E V, Gravity with gravitas: A solution to the border puzzle, American Economic Review, 2003, 93(1): 170–192.CrossRefGoogle Scholar
  22. [22]
    Baltagi B H, Egger P, and Pfaffermayr M, A generalized design for bilateral trade flow models, Economics Letters, 2003, 80(3): 391–397.MathSciNetCrossRefzbMATHGoogle Scholar
  23. [23]
    Li S and Wang H, Transforming trade competition into coordination with the People’s Republic of China, Eds. by Brooks D H and Cheltenham S F, Trade Facilitation and Regional Cooperation in Asia, Edward Elgar, UK and Northampton, MA, USA, 2010.Google Scholar
  24. [24]
    Kepaptsoglou K, Karlaftis M G, and Tsamboulas D, The gravity model specification for modeling international trade flows and free trade agreement effects: A 10-year review of empirical studies, Open Economics Journal, 2010, 3: 1–13.CrossRefGoogle Scholar
  25. [25]
    Hausman J A, Specification tests in econometrics, Econometrica, 1978, 46(6): 1251–1271.MathSciNetCrossRefzbMATHGoogle Scholar
  26. [26]
    Wooldridge J M, Econometric Analysis of Cross Section and Panel Data, The MIT Press, Massachusetts, 2002.zbMATHGoogle Scholar
  27. [27]
    Greene W, Econometric Analysis, Prentice-Hall, New York, 2000.Google Scholar
  28. [28]
    Friedman M, The use of ranks to avoid the assumption of normality implicit in the analysis of variance, Journal of the American Statistical Association, 1937, 32: 675–701.CrossRefzbMATHGoogle Scholar
  29. [29]
    Driscoll J and Kraay A C, Consistent covariance matrix estimation with spatially dependent data, Review of Economics and Statistics, 1998, 80: 549–560.CrossRefGoogle Scholar
  30. [30]
    Baier S L and Bergstrand J H, The growth of world trade: Tariffs, transport costs, and income similarity, Journal of International Economics, 2001, 53: 1–27.CrossRefGoogle Scholar
  31. [31]
    Bergstrand J H, The generalized gravity equation, monopolistic competition, and the factorproportions theory in international trade, Review of Economics and Statistics, 1989, 71(1): 143–153.MathSciNetCrossRefGoogle Scholar
  32. [32]
    Baldwin R, The eastern enlargement of the European Union, European Economic Review, 1995, 39: 474–481.CrossRefGoogle Scholar
  33. [33]
    Oguledo V I and MacPhee C R, Gravity models: A reformulation and an application to discriminatory trade arrangements, Applied Economics, 1994, 26(2): 107–120.CrossRefGoogle Scholar
  34. [34]
    Cyrus T L, Income in the gravity model of bilateral trade: Does endogeneity matter?, International Trade Journal, 2002, 16(2): 161–180.CrossRefGoogle Scholar
  35. [35]
    Harrigan J, Openness to trade in manufactures in the OECD, Journal of International Economics, 1996, 40(1–2): 23–39.CrossRefGoogle Scholar
  36. [36]
    Mankiw N, Romer D, and Weil D, A contribution to the empirics of economic growth, Quarterly Journal of Economics, 1992, 107(2): 407–437.CrossRefzbMATHGoogle Scholar
  37. [37]
    Hummels D and Levinsohn J A, Monopolistic competition and international trade: Reconsidering the evidence, Quarterly Journal of Economics, 1995, 110(3): 799–836.CrossRefGoogle Scholar
  38. [38]
    Wei S J, Intra-national versus international trade: How stubborn are nations in global integration? Cambridge, NBER working paper No.5531, 1996.Google Scholar
  39. [39]
    Kleibergen F and Paap R, Generalized reduced rank tests using the singular value decomposition, Journal of Econometrics, 2006, 133: 97–126.MathSciNetCrossRefzbMATHGoogle Scholar
  40. [40]
    Stock J H and Yogo M, Testing for weak instruments in linear IV regression, Eds. by Andrews D W K and Stock J H, Identification and Inference for Econometric Models: Essays in Honor of Thomas Rothenberg, Cambridge University Press, Cambridge, 2005.Google Scholar
  41. [41]
    Davidson R and MacKinnon J, Estimation and Inference in Econometrics, Oxford University Press, New York, 1993.zbMATHGoogle Scholar
  42. [42]
    Xu L Z, Fang S C, and Zhang X, Transport costs and China’s exports: Some empirical evidences, Journal of Systems Science and Complexity, 2013, 26(3): 365–382.CrossRefzbMATHGoogle Scholar
  43. [43]
    Carruthers R, Bajpai J N, and Hummels D, Trade and logistics: An East Asian perspective, Proceedings of East Asia Integrates: A Trade Policy Agenda for Shared Growth, The World Bank, Washington, DC, 2003.Google Scholar

Copyright information

© Institute of Systems Science, Academy of Mathematics and Systems Science, CAS and Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  • Lizhi Xu
    • 1
    • 2
  • Kin Keung Lai
    • 3
  • Han Qiao
    • 4
    Email author
  • Shouyang Wang
    • 4
    • 5
  1. 1.Collaborative Innovation Center of eTourismBeijing Union UniversityBeijingChina
  2. 2.Tourism InstituteBeijing Union UniversityBeijingChina
  3. 3.Department of Management SciencesCity University of Hong KongHong KongChina
  4. 4.School of Economics and ManagementUniversity of Chinese Academy of SciencesBeijingChina
  5. 5.Academy of Mathematics and Systems ScienceChinese Academy of SciencesBeijingChina

Personalised recommendations