The authors use different data sets to investigate the dependence of transport costs on geography and infrastructure. Infrastructure is an important determinant of transport costs, especially for landlocked countries. Analysis of bilateral trade data confirms the importance of infrastructure and gives an estimate of the elasticity of trade flows with respect to the trade cost factor of around –3. A deterioration of infrastructure from the median to the 75th percentile raises transport costs by 12 percentage points and reduces trade volumes by 28 percent.
Infrastructure, Geographical Disadvantage, Transport Costs and TradeNuno Limão and Anthony Venables ,
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World Bank Economic Review