Importance of the logistics performance index in international trade

This is an author's accepted manuscript of an article published in: “Applied Economics"; Volume 46, Issue 24, 2014; copyright Taylor & Francis; available online at: http://dx.doi.org/10.1080/00036846.2014.916394Logistics and transport increasingly play a pivotal role in international trade relations. The Logistics Performance Index (LPI) analyses differences between countries in terms of customs procedures, logistics costs and the quality of the infrastructure for overland and maritime transport. The aim of this article is to analyse the impact that each of these components has on trade in emerging economies using a gravity model. Furthermore, the study also attempts to detect possible advances in logistics in developing countries, which are grouped into five regions (Africa, South America, Far East, Middle East and Eastern Europe) by comparing the first LPI data published in 2007 with the most recent data, released in 2012. The results obtained reveal that improvements in any of the components of the LPI can lead to significant growth in a country’s trade flows. Specifically, LPI components are becoming increasingly important for international trade in many countries in Africa, South America and Eastern Europe.Martí Selva, ML.; Puertas Medina, RM.; García, L. (2014). Importance of the logistics performance index in international trade. Applied Economics. 46(24):2982-2992. doi:10.1080/00036846.2014.916394S298229924624Anderson, J. E., & van Wincoop, E. (2003). Gravity with Gravitas: A Solution to the Border Puzzle. American Economic Review, 93(1), 170-192. doi:10.1257/000282803321455214Bergstrand, J. H. (1985). The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence. The Review of Economics and Statistics, 67(3), 474. doi:10.2307/1925976Bergstrand, J. H. (1989). The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade. The Review of Economics and Statistics, 71(1), 143. doi:10.2307/1928061De Souza, R., Goh, M., Gupta, S.et al.(2007) An investigation into the measures affecting the integration of ASEAN’s priority sectors: phase 2: the case of logistics.REPSF ProjectNo. 06/001d Regional Economic Policy Support Facility, Association of Southeast Asian Nations, Manila.Heckman, J. J. (1979). Sample Selection Bias as a Specification Error. Econometrica, 47(1), 153. doi:10.2307/1912352Hoekman, B., & Nicita, A. (2010). Assessing the Doha Round: Market access, transactions costs and aid for trade facilitation. The Journal of International Trade & Economic Development, 19(1), 65-79. doi:10.1080/09638190903327476Iwanow, T., & Kirkpatrick, C. (2009). Trade Facilitation and Manufactured Exports: Is Africa Different? World Development, 37(6), 1039-1050. doi:10.1016/j.worlddev.2008.09.014Marti, L., Puertas, R., & García, L. (2012). Relevance of trade facilitation in emerging countries’ exports. The Journal of International Trade & Economic Development, 23(2), 202-222. doi:10.1080/09638199.2012.698639Martínez-Zarzoso, I., & Suárez-Burguet, C. (2000). The determinants of trade performance: influence of R&D on export flows. Applied Economics, 32(15), 1939-1946. doi:10.1080/00036840050155869Mustra, M. A. (2011) Logistic Performance Index, connecting to compete 2010, inUNESCAP Regional Forum and Chief Executives Meeting, The World Bank, Cairo

LOGISTICS PERFORMANCE AND EXPORT COMPETITIVENESS: EUROPEAN EXPERIENCE

This article aims to analyse the importance of logistics performance in European Union (EU) exports over a sample period in order to detect possible advances on behalf of Member States. We will estimate several gravity equations using the Logistics Performance Index (LPI) and its components as characteristic proxy variables of trade facilitation. In order to avoid the possible heterogeneity caused by sample bias, we will employ the two-stage model proposed by Heckman. The estimations of the gravity models using the two-stage Heckman model for 26 EU countries lead to the conclusion that logistics were more important for exporting nations than importing nations in both 2005 and 2010, reinforcing the interest in the exporter side of the paper. In reference to the components of the LPI, Competence and Tracking have acquired greater importance in recent years, in keeping with the weak domestic demand in European countries and their search for new international markets.Puertas Medina, RM.; Martí Selva, ML.; Garcia Menendez, L. (2013). LOGISTICS PERFORMANCE AND EXPORT COMPETITIVENESS: EUROPEAN EXPERIENCE. Empirica. 1-14. doi:10.1007/s10663-013-9241-zS114Anderson JE (1979) A theorical foundation to the gravity equation. Am Econ Rev 69: 106–116 http://www.jstor.org/stable/1802501Anderson J, Van Wincoop E (2003) Gravity with gravitas: a solution to the border puzzle. Am Econ Rev 93:170–192. doi: 10.1257/000282803321455214Arvis JF, Mustra M, Ojala L, Shepherd B, Saslavsky D (2007) Connecting to compete: trade logistics in the global economy. World Bank, WashingtonArvis JF, Mustra M, Panzer J, Ojala L, Naula T (2010) Connecting to compete: trade logistics in the global economy. World Bank, WashingtonArvis JF, Mustra M, Ojala L, Shepherd B, Saslavsky D (2012) Connecting to compete: trade logistics in the global economy. World Bank, WashingtonBehar A, Manner P (2008) Logistics and exports. African economics working paper series 293. CSAE WPS/2008-13. University of Oxford, OxfordBehar A, Venables AJ (2010) Transport costs and international trade. In: Palma A, Lindsey R, Quinet E, Vickerman R (eds) Handbook of transport economics. Edward Elgar, pp 97–115Behar A, Manners P, Nelson B (2009) Exports and logistics. Oxford Department of Economics Discussion Paper 439Bergstrand JH (1985) The gravity equation in international trade: some microeconomic foundations and empirical evidence. Rev Econ Stat 71: 143–153. http://www.jstor.org/stable/1925975Bergstrand JH (1989) The generalized gravity equation, monopolistic competition, and the factor-proportions theory in international trade. Rev Econ Stat 67: 474–481. http://www.jstor.org/stable/1928061Breuss F, Egger P (1999) How reliable are estimations of east-west trade potencials based on cross-section gravity analysis? Empirica 26:86–89. doi: 10.1023/A:1007011329676CILT (2012) Available at http://www.ciltuk.org.uk/pages/royalcharter . Accessed 02 Aug 2012Felipe J, Kumar U (2012) The role of trade facilitation in Central Asia: a gravity model. East Eur Econ 50:5–20. doi: 10.2753/EEE0012-875500401Heckman J (1979) Sample selection bias as a specification error. Econometrica 47: 153–161. http://www.jstor.org/stable/1912352Helpman E, Krugman P (1985) Market structure and foreign trade. Increasing returns, imperfect competition and the international economy. The MIT Press, Cambridge, MA/LondonHertel T, Mirza T (2009) The role of trade facilitation in South Asian economic integration. Study on intraregional trade and investment in South Asia. ADB, Mandaluyong CityHollweg C, Wong M-H (2009) Measuring regulatory restrictions in logistics services. ERIA Discussion Paper Series, no. 14Jane C–C (2011) Performance evaluation of logistic systems under cost and reliability considerations. Transp Res E-Log 47:130–137. doi: 10.1016/j.tre.2010.09.012Keskin MH (2012) The exigencies of the common logistics policy for European community and the deconstruction of the common transportation policy. Afr J Bus Manage 6:10697–10707. doi: 10.5897/AJBM11.1523Korinek J, Sourdin P (2011) To what extent are high-quality logistics services trade facilitating? Oecd trade policy working papers 108. OECD PublishingLangley C, Coyle J, Gibson B, Novak R, Bardi E (2008) Managing supply chain: a logistics approach. South–Western College Publishing, LondonMangan J, Lalwani C, Butcher C (2008) Global logistics and supply chain management. Wiley John & Sons, Inc., Hoboken, NJMartí ML, Puertas R, García L (2012) Relevance of trade facilitation in emerging countries′s export. J Int Trade Eco Dev. http://www.tandfonline.com/doi/abs/10.1080/09638199.2012.698639Requena F, Llano C (2010) The border effects in Spain: an industrial-level analysis. Empirica 37:455–476. doi: 10.1007/s10663-010-9123-6Rushton A, Oxley J, Croucher P (2009) The handbook of logistics and distribution management. Kogan Page, LondonVilko J, Karandassov B, Myller E (2011) Logistic infrastructure and its effects on economic development. China–USA Bus Rev 10:1152–1167World Bank (2010) Trade and transport facilitation assessment: a practical toolkit for country implementation. World Bank, Washingto

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