Transportation Costs and the Spatial Structure of Brazilian Interstate Commerce

Abstract

The objective of this paper is to provide a model of the Brazilian interstate commerce with emphasis on the derived demand for transportation and the impact of logistics cost on the spatial pattern of internal trade. The effects of transportation and logistics cost are assessed both in terms of the volume and the distribution of trade, according to the level of economic development and sectoral specialization of each state. The estimation of the model tests alternative specifications for the functional form and the distribution of the error term. The results show that a model based on the Poisson distribution is more appropriate that the log-normal model usually employed in spatial interaction analysis. A flexible specification of the functional form also provides improvements in the statistical adjustment of the model. The selected specification and estimation process of the model exhibits interesting results with respect to the elasticities of commerce with respect to the production structure and transportation costs. It reveals that impact of a comprehensive toll road program is more intense on the trade of agricultural states and between more distant states.