Ports vs. Roads: Infrastructure, Market Access and Regional Outcomes
Ports are at the center of international trade’s infrastructure network. I provide a framework to estimate the quality of different ports and to estimate trade costs on normal roads and expressways. I apply my framework to India and find that quality varies significantly across Indian ports: the standard deviation in Indian port quality is
equivalent to an ad-valorem trade cost of around 15%. I then build a general equilibrium model of international and internal trade with port and road infrastructure to assess the relative importance of ports versus roads in shaping international market access. Improving all ports to the level of the best port increases average wages by 1% across Indian districts. Reducing international costs as if all roads to ports became expressways increases wages by 0.1%, an order of magnitude less. Converting all roads to expressways to reduce internal trade cost as well as international costs increases wages by 0.6%. Improvements in ports and roads have different distributional implications. Port improvements increase international market access more and benefit export-oriented regions, while improving roads benefits domestically oriented regions. The differential distributional impact might make both types of infrastructure improvement attractive despite the larger aggregate gains from ports improvement.
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