Time as a Trade Barrier

By David L. Hummels, Georg Schaur. GTAP Working Paper, 2002

1,183 citations recorded by the source corpus.

International trade occurs in physical space and moving goods requires time. This paper examines the importance of time as a trade barrier, estimates the magnitude of time costs, and relates these to patterns of trade and the international organization of production. Estimates indicate that each additional day spent in transport reduces the probability that the US will source from that country by 1 – 1.5 percent. Conditional on exporting country, estimates directly identify a willingness-to-pay for time savings using variation across exporters and commodities in the relative price / speed tradeoff for air and ocean shipping. Each day saved in shipping time is worth 0.8 percent ad-valorem for manufactured goods. Relative declines over time in air shipping prices make time-savings less expensive, providing a compelling explanation for aggregate trade growth, compositional effects in trade growth, as well as growth in time-intensive forms of integration such as vertical specialization. Specifically, the advent of fast transport (air shipping and faster ocean vessels) is equivalent to reducing tariffs on manufactured goods from 32% to 9% between 1950-1998.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/9e6872cd4cab6f02c237eb37deea92cbc1cfd3cd

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Citations in the corpus

Dynamic Effects of the "New Age" Free Trade Agreement between Japan and Singapore (2001, positive): “Hummels (2000) emphasizes that such time savings can have a profound effect on international trade by reducing both " spoilage " and inventory holding costs.”
Globalization in History: A Geographical Perspective (2001, neutral): “The importance of time in transit has been estimated in recent work by Hummels (2000) who finds that the cost of an extra day's travel is (for imports as a whole) around 0.3% of the value shipped.”
Geography and International Inequalities: The Impact of New Technologies* (2001, positive): “The importance of the costs of time in transit is highlighted by recent work by Hummels (2000), who analyses data on some 25 million observations of shipments into the US, some by air and some by sea (imports classified at the 10-digit commodity level by exporter country and district of entry to…”
Roads and Trade: Evidence from the US (2014, positive): “The first problem we face is that trade flows between any two cities i and j will reflect the cost of transportation that i and j face when they trade with other cities, as well as the cost of transportation between i and j.”
The Impact of Port Characteristics on International Maritime Transport Costs (2006, neutral): “Hummels (1999, 2000 and 2001) assesses whether international transport costs have declined, and introduces time as a trade barrier. Wilson et al (2003) find that port efficiency has a strong and significant impact on bilateral trade flows in the Asia Pacific region.”
International Trade, Risk and the Role of Banks (2017, positive): “…requirements are proportional to the time it takes to transport goods from the producer in the source country to the final consumer in the destination country.44 A similar mechanism should also increase the cost 43The role of time to trade was first studied empirically in Hummels and Schaur (2013).”
Shifts in Economic Geography and their Causes (2006, neutral): “For the United States, the value of time saved by airfreight and containerization has been estimated as some 12 percent to 13 percent of the value of goods shipped (Hummels, 2000).”
Determinants of Global Value Chain Participation: Cross-Country Evidence (2020, positive): “Hummels and Schaur (2013) find that a day of delay in transit due to a different transport mode choice has a tariff equivalent of 0.6 to 2.1 percent, and the most sensitive flows are for a type of GVC trade, that is, trade in parts and components.”
Towards a Theory of Trade Finance (2011, positive): “Hummels (2001) discusses the effect of physical transport time while Djankov, Freund, and Pham (2006) analyze the effect of time delay from the factory gate to the means of transportation on international trade.”
How Much Will the Belt and Road Initiative Reduce Trade Costs? (2018, methodology): “For each directed pair of countries, we then build the “value of time” associated with the trade of GTAP_1 from the origin to the destination, by taking the trade‐weighted average of the underlying HS estimates from Hummels and Schaur (2013). Using the numerical example above, the value f”
Domestic Road Infrastructure and International Trade: Evidence from Turkey (2016, positive): “While measures taking into account internal distances are available (Redding and Venables 2004), they do not explicitly control for the quality of transportation infrastructure which is clearly important in determining domestic freight costs besides distance. Intuition and evidence suggest that the ”