Investment in Infrastructure and Trade: The Case of Ports

Theodore Papageorgiou will discuss new research that quantifies the costs of port disruptions and evaluates transportation infrastructure investment.

Speaker: Theodore Papageorgiou, Felter Family Professor of Economics at Boston College

Paper Abstract: (joint with Giulia Brancaccio and Myrto Kalouptsidi)

Transportation infrastructure is vital for the smooth functioning of international trade. Ports are a crucial gateway to this system: with more than 80% of trade carried by ships, they shape trade costs, and it is critical that they operate efficiently. Yet ports are susceptible to disruptions, causing costly delays. With enormous budgets spent on infrastructure to alleviate these costs, a key policy question emerges: in a world with high volatility, what are the returns to investing in infrastructure? To address this question, we introduce an empirical framework that combines insights from queueing theory to capture port technology, with tools from demand estimation. We use our framework, together with a collection of novel datasets, to quantify the costs of disruptions and evaluate transportation infrastructure investment. Our analysis unveils four policy-relevant messages: (i) investing in port infrastructure can lead to substantial trade and welfare gains, but only if targeted properly– in fact, net of costs, the marginal return to investment is positive at a minority of US ports; (ii) there are sizable spillovers across ports, as investing in one port can decongest a wider set of ports, suggesting that decision-making should not be decentralized to local authorities; (iii) the economies of scale arising from queuing would lead a planner to concentrate investment in large, geographically dispersed megaports; (iv) macroeconomic volatility can drastically change returns to investment.

Whether attending in person or virtually, please register in advance. Room attendance is permitted for the Harvard community. The Zoom session is open to the public.

Speaker Bio: Theodore Papageorgiou’s recent research examines transportation markets, their impact on global trade, and the policies that can improve their efficiency and resilience. His work also analyzes the sources of disruptions and the optimal level of infrastructure investment. In addition, he has investigated how occupations shape labor market outcomes, the role of cities and firms in facilitating occupational matching, and the role of learning in shaping firm performance. His research integrates insights and tools from labor economics, macroeconomics, spatial/urban economics, and applied microeconomics more broadly. Read more >>

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