A Better Pathway to Export: How the Quality of Road Infrastructure Affects Export Performance

Abstract

Assessing the trade impact of road quality improvements is data demanding. In this article, we overcome this limitation by combining highly disaggregated records of export flows with detailed geo-referenced information of the Chilean transport network, including its road quality, as well as real measures of transport costs of shipping goods within the country to measure the trade impact of improving road quality. We find that an improvement in road quality that generates an average reduction in transport costs of 16% increases average exports by around 2%, but we find considerable dispersion in these gains.

Keywords:

• transport costs
• road quality
• regional exports

ACKNOWLEDGMENTS

We would like to thank our editor, Tagi Sagafi-nejad, and two anonymous referees for providing us with constructive comments and suggestions.

The views and interpretations in this article are strictly those of the authors and should not be attributed to the Inter-American Development Bank, its Board of Directors, or any of its member countries.

Notes

¹Herfindahl and Treat (2009) also raise the issue of road infrastructure and exports. However, the analysis does not estimate an actual relationship between these variables. The report is more general and informative about the estate of the road infrastructure in sub-Saharan Africa and its potential impact of export competitiveness.

²Port here refers to ports, airports, or borders.

³For details, see http://www.wto.org/english/res_e/statis_e/technotes_e.htm.

⁴We repeat the exercise with the other years of the sample and obtain similar results.

⁵The value of n is low for roads where the dominating roughness amplitudes have short wavelengths, such as on a modern designed highway with a deteriorated surface with plenty of potholes. The value of n is high for roads where the dominating roughness amplitudes have long wavelengths, such as on an ancient designed rural low volume road (Ahlin & Granlund 2002).

⁶While there is consensus in the literature that maintenance, tire, repair, and depreciation costs are affected by roadway conditions, the effect on fuel consumption is less clear. Many argue, for example, that there is no measurable difference in fuel consumption on paved roads of different roughness.

⁷Note that this is a conservative increase because it is likely that the increase in transport costs when the road has an IRI in the 8–14 range (bad) will be higher than when the road has an IRI in the 3–8 range (regular). However, we apply the same 25% increase for both regular and bad roads because we do not have information on how much higher these costs should be in bad roads as the analysis in Barnes and Langworthy (2003) does not differentiate between road conditions for IRI's higher than 2.7.