Import tariffs and transport prices
In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Band 57, Heft 2, S. 430-458
ISSN: 1540-5982
AbstractThis paper discusses how import tariffs interact with transport prices in episodes of trade liberalization. We develop a model of a transport industry that operates under imperfect competition and economies of scale. Double marginalization due to market power reduces the effects of trade liberalization, while a larger trade volume may support them due to economies of scale. We use a large data set of maritime transport data and combine them with tariff data to find that economies of scale beat market power: a decline in the tariff implies a decline in freight rates.