HANDLING INTERREGIONAL TRANSPORT AND TRANSACTION COSTS TROUGH BRIDGES

Abstract

The most important impediment to interregional trade is the transportation and transaction cost among trading parties. In this study, the transportation and transaction cost is characterized in three different forms of gaps between trading partners viz; physical, institutional, and social. In all forms of gaps, movement can be facilitated by a form of bridge. Bridges, as an abstract concept, can be characterized as i) physical bridges connecting two sides of any geographic obstacles, ii) institutional bridges handling transaction limitations (such as absence of compatible telecommunication, banking, legal system), and iii) socio-cultural bridges dealing with difficulties for mutual understanding of trading parties such as cultural mismatches. Physical bridges are the basic capital investments linking physical gaps between sides such as tunnels, bridges, highways, airports. Institutional bridges are the compatible institutional structures among regions, states, countries such as banking, insurance finance, and legal structures. Socio-cultural bridges are the socio-cultural proximities among societies such as historic backgrounds, common languages, familiar religious practices, common cultural identities from food to humor. In this study, first, the benefits of bridges are theoretically presented, and then the advantages of various forms of bridges to the selected country, Turkey, are critically presented. The study has shown that, Turkey has been handling all forms of transportation and transaction costs not only through the physical bridges but also through the legal, institutional as well as the informal and emotional bridges. In this process, Turkey is taking advantage of her geostrategic and geopolitical location as well as her geo-cultural characteristics which have been accumulated throughout history. As a result, all efforts aimed to reduce the cost of transportation and transaction bring about additional consumer and producer surpluses and which consequently bring about positive welfare gain to the Turkish society.