Abstract - The containerized maritime transportation industry is characterized by oligopolistic
competition and economies of scale. In this paper, we examine the effect that these industry characteristics have on trade. We build a model of endogenous transportation costs within a standard Melitz (2003) framework. Countries with large trade volumes face lower transportation costs because they can take advantage of economies of scale and competition in the transportation industry. We assemble a unique dataset on the containerized maritime transportation industry. The dataset includes the freight prices for transporting a container to a foreign port, the number of transportation firms operating between the US and foreign port, and the port-to-port trade flows. We document facts that are consistent with our theory. First, countries with larger trade volumes pay less in transportation costs. Second, countries with larger trade volumes have more and larger transportation firms. We then calibrate our model and estimate a transportation technology to evaluate trade reforms. Our results indicate that transportation costs fall more in smaller markets from tariff reductions. A model that considers the endogenous response of transportation costs to a trade liberalization can generate welfare gains that are 50% more than a model in which transportation costs are constant.
Abstract - We investigate the role of transportation infrastructure in explaining resource misallocation
and income in India. We extend the endogenous variable markups model by Atkeson and Burstein (2008) into a multi-region setting in which asymmetric states trade with each other. High transportation costs that result from poor infrastructure quality generate misallocation of resources by increasing dispersion in market power across firms. Using a rich micro-level dataset constructed from manufacturing and geospatial data, we find preliminary evidence that is consistent with our theory. Using the construction of the Golden Quadrilateral as a natural experiment, we find that prices declined by 20% in districts crossed by this road. We calibrate the model and simulate an improvement in Indian road quality. We find the aggregate gains for improved road quality. We also decompose these gains into Ricardian and pro-competitive components.
Abstract - This paper studies the interaction
between financial frictions and entry barriers on growth. We construct a
model in which aggregate growth is driven by the continual entry of new firms
that face barriers to entry and financial frictions. We find that reforms to
financial frictions and entry barriers are substitutes—once a country has
enacted one type of reform, the percentage increase in GDP from the other
reform decreases. We
also show that economies with more severe financial frictions and entry costs have lower
levels of output along the balanced growth path, even though all economies grow
at the same constant rate. The model generates sharp predictions regarding the
rate of firm creation, aggregate output levels, and aggregate growth rates,
which are borne out in the cross country data.