How Much Will the Belt and Road Initiative Reduce Trade Costs?

By F. D. Soyres, Alen Mulabdic, S. Murray, Nadia Rocha, Michele Ruta. International Finance Discussion Paper, 2018

202 citations recorded by the source corpus.

This paper studies the impact of transport infrastructure projects of the Belt and Road Initiative on shipment times and trade costs. Based on a new data on completed and planned Belt and Road transport projects, Geographic Information System analysis is used to estimate shipment times before and after the Belt and Road Initiative. Two sets of data are computed to address different research questions: a global database based on an analysis of 1,000 cities in 191 countries and 47 sectors and a regional database that focuses on more granular information (1,818 cities) for Belt and Road economies only. The paper uses sectoral estimates of “value of time” to transform changes in shipment times into changes in ad valorem trade costs at the country-sector level. The findings show that the Belt and Road Initiative will significantly reduce shipment times and trade costs. For the world, the average reduction in shipment time will range between 1.2 and 2.5 percent, leading to reduction of aggregate trade costs between 1.1 and 2.2 percent. For Belt and Road economies, the change in shipment times and trade costs will range between 1.7 and 3.2 percent and 1.5 and 2.8 percent, respectively. Belt and Road economies located along the corridors where projects are built experience the largest gains. Shipment times along these corridors decline by up to 11.9 percent and trade costs by up to 10.2 percent. The paper also shows that these effects are magnified by policy reforms that reduce border delays and improve corridor management.

Subfields: Economics and Econometrics, Industrial and Manufacturing Engineering

View Paper: https://www.semanticscholar.org/paper/6b901f03c973c225c796051486fe963ddf0255d7

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

Citations in the corpus

Common transport infrastructure: A quantitative model and estimates from the Belt and Road Initiative (2019, background): “Second, as is apparent from the expression of expenditure shares (9), trade flows are governed by comparative advantage and firms optimize their sourcing decisions by comparing all possible options.”