From mine to coast: Transport infrastructure and the direction of trade in developing countries

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Mine-related transport infrastructure specializes in connecting mines to the coast, and not so much to neighboring countries. This is most clearly seen in developing countries, whose transport infrastructure was originally designed to facilitate the export of natural resources in colonial times. We provide first econometric evidence that mine-to-coast transport infrastructure matters for the pattern of trade of developing countries, and can help explaining their low level of regional integration. The main idea is that, to the extent that it can be used not just to export natural resources but also to trade other commodities, this infrastructure may bias a country's structure of transport costs in favor of overseas trade, and to the detriment of regional trade. We investigate this potential bias in the context of a gravity model of trade. Our main findings are that coastal countries with more mines import less than average from their neighbors, and this effect is stronger when the mines are located in such a way that the related infrastructure has a stronger potential to affect trade costs. Consistently with the idea that this effect is due to mine-to-coast infrastructure, landlocked countries with more mines import less than average from their non-transit neighbors, but more than average from their transit neighbors. Furthermore, this effect is specific to mines and not to oil and gas fields, arguably because pipelines cannot possibly be used to trade other commodities. We discuss the potential welfare implications of our results, and relate these to the debate on the economic legacy of colonialism for developing countries. Terms of use: Documents inJEL-Code: F140, F540, Q320, R400.

Mining Matters: Natural Resource Extraction and Local Business Constraints

“…Donaldson (2014) shows how new railways in colonial India integrated regions and boosted welfare gains from trade. In a similar vein, Bonfatti and Poelhekke (2015) show how purpose-built mining infrastructure across Africa determined longterm trading patterns between countries. In China, the construction of trunk roads and railways reinforced the concentration of economic activity and increased economic output (Faber, 2014 andBanerjee, Duflo andQian, 2012).…”

Local Content, Supply Chains, and Shared Infrastructure

“…Mine-related infrastructure typically connects mines directly to the coast. As found by Bonfatti and Poelhekke (2015), such infrastructure may bias a country's transport costs in favour of overseas trade, to the detriment of trade with neighbours and regional integration. Coastal destinations with more mine to coast infrastructure import relatively less from neighbours, and this effect is stronger when the infrastructure overlaps with routes used to import from overseas.…”

Spatial Diffusion of Economic Shocks in Networks

“…Studies in this area often focus on the construction of new highways in, e.g., China or India (Banerjee et al, 2012, Faber, 2014, Alder, 2015. Like us, Storeygard (2016) and Bonfatti and Poelhekke (2017) focus on road networks in Africa. Storeygard (2016) investigates the effect of transportation costs on the income of African cities.…”

“…Storeygard (2016) investigates the effect of transportation costs on the income of African cities. Bonfatti and Poelhekke (2017)…”