The Impact on Trade Flows of Transportation and Other Costs: An Empirical Study in East Asia

摘要

Krugman (1995) argues that the growth of world trade is due to technology-led declines in transportation costs, suggesting that transportation costs are still playing an important role in impeding trade between countries. In this paper a panel data study on the impact of relative trade barriers on bilateral exports within East Asia is examined using a gravity model. In the first step the impact of technology factor along with geographical factors and institutional factors on bilateral transportation costs is investigated. In the second step, GMM and an instrumental variable approach is used to tackle the econometric problem of endogeneity. We confirm that cultural and technology factors as well as institutional factors have significant effects on transportation costs across East Asia nine countries, the improvements in infrastructure and technology will stimulate bilateral trades in East Asia.