Trucks

High transportation costs in developing countries are often cited as a key hindrance to economic growth, and billions upon billions of dollars have been invested in infrastructure in order to reduce these costs. If the transportation sector is uncompetitive, however, it is unclear whether these infrastructure improvements will result in lower prices for consumers. In this paper, we develop a new spatial model featuring imperfect competition in the transportation sector that highlights a “triple curse of remoteness”: more remote locations face higher marginal costs for the same distance, face higher markups from less competition, and are served by worse transportation providers. Investments in infrastructure not only reduce physical costs of shipping, they also improve competition and induce better transportation firms to enter. We confirm the model predictions by examining a large-scale infrastructure improvement in Colombia using a new truck- and shipment-level data.

Seminar Link (please email m.lambrianidou@ucl.ac.uk for seminar password)