Analysis on transport costs and China's exports.

Based on the annual data set, which involves a balanced panel of four port cities exports to 32 countries and Hong Kong, China over the period of 1997 2008, this paper is the first attempt to extend the conventional gravity model to measure the effect of transport costs and port efficiency on China's exports. Our results can be summarized in three main findings: 1) the improvement of port efficiency and reduction of road transport costs play a vital role in China's export competitiveness in the global market. The coefficient estimates on them are relatively large, around 0.72 and -0.89, respectively; 2) the effect of transport costs and port efficiency on China-to-Asia exports significantly exceeds that on China-to-Europe and China-to-America exports; 3) the overall estimated elasticity of road, railroad and port measure is 1.66, which is almost three times that of the average wage of port cities. The empirical results provide strong evidences that improvement in the quality of transportation services in port cities of China exhibit significant economic effects not only on how much but also how trade grows. [ABSTRACT FROM AUTHOR]