Have International Transportation Costs Declined

Abstract

While the precise causes of post-war trade growth are not well understood, declines in transport costs top the lists of usual suspects. However, there is remarkably little systematic evidence documenting the decline. This paper provides a detailed accounting of the time-series pattern of shipping costs. Direct evidence from an eclectic mix of data shows that ocean freight rates have increased while air freight rates have declined rapidly. Indirect evidence suggests that the cost of overland transport has declined relative to ocean transport. For all modes, the freight costs associated with increased distance have declined. Data on the changing composition of trade are broadly consistent with these changes in relative prices.

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