Quality of transport infrastructure and logistics as source of comparative advantage

Abstract

Building on the well-established empirical findings on the importance of transport infrastructure and logistics for trade, this paper empirically investigates whether the quality of transport infrastructure and logistics is a source of comparative advantage in industries for which logistics services are important. Transport infrastructure and logistics are important inputs in the supplying of goods abroad and in the sourcing of intermediates. To account for the emergence and proliferation of Global Value Chains (GVCs) that have significantly changed the way of organizing production and distribution of goods, we measure export performance by value added in exports rather than gross exports used in the empirical studies on sources of comparative advantage. Using exporter-importer-year, importer-industry-year and exporter-industry fixed effects, we find that a country's ability to provide high-quality transport infrastructure and logistics is a source of comparative advantage in the logistics intensive industries. The results are robust to an alternative measure of transport infrastructure quality and a number of alternative specifications. Even with changes in the sample of countries, the quality of transport infrastructure and logistics continues to be an important determinant of comparative advantage. These findings suggest that transport policies to improve the quality of transport infrastructure and logistics contribute to acquiring comparative advantage.