Determinants of the Negative Impact of Being Landlocked on Trade: An Empirical Investigation Through the Central Asian Case

Abstract

In this paper, the impact of land-lockedness on trade is estimated for a panel database using a gravity approach. By first examining Central Asian economies, it appears that land-lockedness implies a high transport cost burden. In a second step, the impact of land-lockedness on trade has been measured using four measures of being landlocked: the first estimation is obtained by introducing a dummy variable, the second estimate uses the shortest distance between a land-locked country and the nearest major port facility, the third measure represents the number of borders with coastal countries and the fourth is the number of national borders crossed. From over 10,000 observations, using a sample of 46 countries over a 5-year period, we conclude that being landlocked would reduce trade by more than 80% when measured by a dummy variable. Using the Cheng and Wall econometric approach, we find that the four measures are confirmed empirically. Finally, evidence shows that the number of border-crossings, which implies a transport cost burden, can explain a major part of the extra cost of overland transport in comparison with maritime transport.