According to theory, the effect of carriers' transport costs on freight prices depends on the directional imbalance in transport flows. Using data on inland waterway transport, we demonstrate that when the ratio of export to import trips doubles, the marginal effect of carriers' transport costs on freight prices of goods exported increases by about 30 percent. Our identifying methodology is based on an innovative approach using natural variation in river water levels that affect the costs of transport.
# 11-134/3 (2011-09-26)
- Olaf Jonkeren, European Commission, JRC; Jos N. van Ommeren, VU University Amsterdam; Piet Rietveld, VU University Amsterdam
- directional imbalance, transport prices
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