Transportation Costs and International Trade over Time
Transportation Costs and International Trade Over Time
David Hummels
David Hummels is Associate Professor of Economics, Purdue University, West Lafayette,
Indiana. His e-mail address is <hummelsd@purdue.edu>.
Abstract:
While the precise causes of post-war trade growth are not well understood, declines in transport costs top the lists of usual suspects. However, there is remarkably little systematic evidence documenting the decline. This paper brings to bear an eclectic mix of data in order to provide a detailed accounting of the time-series pattern of shipping costs. The ad-valorem impact of ocean shipping costs is not much lower today than in the 1950s, with technological advances largely trumped by adverse cost shocks. In contrast, air shipping costs have dropped an order of magnitude, and airborne trade has grown rapidly as a result. As a result, international trade has also experienced a significant rise in speed.
2
Over the past five decades, world trade grew very rapidly. From 1950-2004, world trade grew at an average rate of 5.9 percent per annum (7.2 percent for manufactures) and trade relative to output more than tripled. (World Trade Organization, International Trade Statistics,
2005). Similarly, the sum of U.S. imports and exports rose from 6.5 percent in 1960 to about 20 percent of GDP in the early 2000s (based on data at <http://www.bea.gov>).
One prominent possible explanation for the rise in international trade is the decline in international transportation costs. Economic historians have documented how technological change led to substantial reductions in shipping costs from 1850-1913 (Harley, 1980, 1988,
1989; North, 1958, 1968; Mohammed and Williamson, 2004). Econometric evidence has subsequently linked shipping cost declines to rapid growth in trade during that first era of globalization (Estevadeordal et al., 2003). The decades since World War II have also witnessed significant technological change in shipping,
David Hummels
David Hummels is Associate Professor of Economics, Purdue University, West Lafayette,
Indiana. His e-mail address is <hummelsd@purdue.edu>.
Abstract:
While the precise causes of post-war trade growth are not well understood, declines in transport costs top the lists of usual suspects. However, there is remarkably little systematic evidence documenting the decline. This paper brings to bear an eclectic mix of data in order to provide a detailed accounting of the time-series pattern of shipping costs. The ad-valorem impact of ocean shipping costs is not much lower today than in the 1950s, with technological advances largely trumped by adverse cost shocks. In contrast, air shipping costs have dropped an order of magnitude, and airborne trade has grown rapidly as a result. As a result, international trade has also experienced a significant rise in speed.
2
Over the past five decades, world trade grew very rapidly. From 1950-2004, world trade grew at an average rate of 5.9 percent per annum (7.2 percent for manufactures) and trade relative to output more than tripled. (World Trade Organization, International Trade Statistics,
2005). Similarly, the sum of U.S. imports and exports rose from 6.5 percent in 1960 to about 20 percent of GDP in the early 2000s (based on data at <http://www.bea.gov>).
One prominent possible explanation for the rise in international trade is the decline in international transportation costs. Economic historians have documented how technological change led to substantial reductions in shipping costs from 1850-1913 (Harley, 1980, 1988,
1989; North, 1958, 1968; Mohammed and Williamson, 2004). Econometric evidence has subsequently linked shipping cost declines to rapid growth in trade during that first era of globalization (Estevadeordal et al., 2003). The decades since World War II have also witnessed significant technological change in shipping,
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