Transportation Costs and International Trade in the Second Era of Globalization

TLDR

Postwar trade growth is largely attributed to falling transport costs, yet systematic evidence of this decline is scarce. The paper aims to provide a detailed accounting of the time‑series pattern of shipping costs using an eclectic mix of data. It employs this diverse data set to trace the evolution of shipping costs over time. Ocean shipping costs have remained largely unchanged in ad‑valorem terms since the 1950s, while air shipping costs have fallen tenfold, accelerating airborne trade and increasing overall trade speed.

Abstract

While the precise causes of postwar 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.