DP15487 All aboard: The effects of port development

Author(s): Cesar Ducruet, Réka Juhász, Dávid Krisztián Nagy, Claudia Steinwender
Publication Date: November 2020
Date Revised: March 2021
Keyword(s): Containerization, Port Development, Quantitative Economic Geography
JEL(s): F6, O33, R40
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15487

By using local land intensively, ports put pressure on land prices and crowd out other economic activity. Using the introduction of containerized shipping â?? a relatively landintensive technology â?? we find an important role for this effect. At the local level, we find that the causal effect of the shipping boom caused by containerization on population is zero â?? port development increases city population by making a city more attractive, but this well-known market access effect is fully offset by the crowding-out mechanism. At the aggregate level, while we find overall welfare gains from containerization, our quantitative model featuring endogenous port development also implies i) sizeable welfare costs associated with the increased land-usage of ports, and ii) sizeable gains from cities' endogenous specialization across port- and non-port activities. These mechanisms are particularly important for targeted port development policies, which we illustrate using the Maritime Silk Road.