Working Paper: NBER ID: w11688
Authors: James Harrigan
Abstract: Airplanes are a fast but expensive means of shipping goods, a fact which has implications for comparative advantage. The paper develops a Ricardian model with a continuum of goods which vary by weight and hence transport cost. Comparative advantage depends on relative air and surface transport costs across countries and goods, as well as stochastic productivity. A key testable implication is that the U.S. should import heavier goods from nearby countries, and lighter goods from faraway counties. This implications is tested using detailed data on U.S. imports from 1990 to 2003. Looking across goods the U.S. imports, nearby exporters have lower market share in goods that the rest of the world ships by air. Looking across exporters for individual goods, distance from the US is associated with much higher import unit values. These effects are large, which establishes that the model identifies an important influence on specialization and trade.
Keywords: Comparative Advantage; Transport Costs; Air Shipment; International Trade
JEL Codes: F1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Nearby exporters (Canada and Mexico) (F10) | Average market share of faraway exporters (F10) |
| Goods imported from more distant countries (F29) | Unit values of imports (F14) |
| 1% increase in the value-weight ratio (D46) | Likelihood of air shipment (L93) |
| Transport costs and distance (R41) | Trade patterns (F10) |