Backfiring with Backhaul Problems: Trade and industrial policies with endogenous transport costs

         
Author Name ISHIKAWA Jota (Faculty Fellow, RIETI) / TARUI Nori (University of Hawaii at Manoa)
Creation Date/NO. January 2016 16-E-006
Research Project Analyses of Trade Costs
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Abstract

Trade barriers due to transport costs are as large as those due to tariffs. This paper explicitly incorporates the transport sector into the framework of an international oligopoly and studies the effects of trade and industrial policies. Transport firms need to commit to a shipping capacity sufficient for a round trip, with a possible imbalance of shipping volumes in two directions. Because of this "backhaul problem," trade restrictions may backfire: domestic import restrictions may also decrease domestic exports, possibly harming domestic firms and benefiting foreign firms. In addition, trade policy in one sector may affect other independent sectors.

Published: Ishikawa, Jota, and Nori Tarui, 2018. "Backfiring with backhaul problems," Journal of International Economics, Vol. 111, pp. 81-98
https://www.sciencedirect.com/science/article/pii/S0022199617301460