We gratefully acknowledge funding from the ERC and the Provost’s Office at Columbia. Dávid acknowledges financial support from the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (CEX2019-000915-S and SEV-2015-0563) and through a Juan de la Cierva Grant (FJCI-2017-34728), the Spanish State Research Agency and the European Social Fund (PID2019-111691RA-I00 and RYC2019-027620-I/AEI/10.13039/501100011033) and from the Generalitat de Catalunya, Spain, through CERCA and SGR Programme (2017-SGR-1393). César gratefully acknowledges financial funding from the French National Research Agency (ANR) project “MAGNETICS” No. ANR-22-CE22-0002 (Maritime Globalization, Network Externalities, and Transport Impacts on Cities).

Seaports facilitate the fast flow of goods across space, but ports also entail local costs borne by host cities. We use the introduction of containerized shipping to explore the effects of port development. At the local level, we find that seaport development increases city population by making a city more attractive, but this market access effect is offset by costs which make the city less attractive. At the aggregate level, we find that the local costs associated with port development are heterogeneous across cities and reduce aggregate welfare gains. Net of the costs, our results suggest that containerization in seaports increased world welfare by 3.4%.

Supplementary materials files: online appendix; replication data.