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Shipping cost and development of the landlocked developing countries: Panel evidence from the common correlated effects approach
Author(s) -
Pham Ngoc Thien Anh,
Sim Nicholas
Publication year - 2020
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12871
Subject(s) - landlocked country , container (type theory) , economics , estimator , developing country , econometrics , estimation , cost estimate , panel data , international trade , economic growth , statistics , mathematics , engineering , mechanical engineering , management , political science , law
We estimate the impact of shipping cost on development for landlocked developing countries ( LLDC s). Since container trade is important to them, we construct a country‐specific measure of shipping cost, called HarpexCost , which combines the global cost of container shipping with information on how exposed to container shipping each LLDC is. We employ the common correlated effects ( CCE ) estimator of Pesaran ( Econometrica , 2006; 55: 967) to first estimate the impact of HarpexCost on the LLDC s’ development, and then recover the actual impact of shipping cost from these estimates. Overall, we observe that shipping cost has large negative effects on the LLDC s. Building upon these results, we provide new estimates on the cost of landlockedness and how trade benefits their development.