An empirical examination of bilateral seaborne trade flows in the world economy

Doctoral thesis English OPEN
Kavussanos, M.G.
  • Subject: HB

The aim of this thesis is to construct a disaggregated econometric model of the pattern of bilateral seaborne trade flows. Commodities are classified into 5 categories according to the type of ship used in their transportation. Exports and imports are classified into 30 regions, according to the major sea-lanes used by ships. An understanding of the determinants of trade f lows at this level of disaggregation is important for shipowners. The use of disaggregated data also helps in the estimation of the price elasticities of traded goods, an issue of more general interest to exporters and policy makers. Our theoretical model borrows the ideas of multistage budgeting from consumer demand theory. The total imports of each importing region are allocated amongst their trade partners, depending on relative prices and trends in tastes. Our econometric implementation of the model uses the very general Constant Ratio of Elasticities of Substitution Homogeneous (CRESH) functional form. This encompasses the CES, LES, Cobb-Douglas and Leontief forms, more commonly used in trade models. Empirical implementation of the model has resulted in elasticity estimates which are much higher than those estimated in earlier trade models. This indicates a high degree of competition in international markets. The pattern of these elasticities suggest that importing regions establish a few trade partners internationally for the main bulk of their imports, while the proportion of their imports allocated to the remaining trade partners, is highly sensitive to relative prices.
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