Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2013:4: Estimating the Effects of the Container Revolution on World Trade

Daniel M. Bernhofen (), Zouheir El-Sahli () and Richard Kneller ()
Additional contact information
Daniel M. Bernhofen: University of Nottingham
Zouheir El-Sahli: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Richard Kneller: University of Nottingham

Abstract: The introduction of containerization triggered complementary technological and organizational changes that revolutionized global freight transport. Despite numerous claims about the importance of containerization in stimulating international trade, econometric estimates on the effects of containerization on trade appear to be missing. Our paper fills this gap in the literature. Our key idea is to exploit time and cross-sectional variation in countries’ adoption of port or railway container facilities to construct a time-varying bilateral technology variable and estimate its effect on explaining variations in bilateral product level trade flows in a large panel for the period 1962-1990. Our estimates suggest that containerization did not only stimulate trade in containerizable products (like auto parts) but also had complementary effects on non-containerizables (like automobiles). As expected, we find larger effects on North-North trade than on North-South or South-South trade and much smaller effects when ignoring railway containerization. Regarding North-North trade, the cumulative average treatment effects of containerization over a 20 year time period amount to about 700%, can be interpreted as causal, and are much larger than the effects of free trade agreements or the GATT. In a nutshell, we provide the first econometric evidence for containerization to be a driver of 20th century economic globalization.

Keywords: containerization; 20th century global transportation infrastructure

JEL-codes: F13

34 pages, February 15, 2013

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