Presented By: Department of Economics
Network Complementarities in Maritime Trade Infrastructure: Evidence from the Philippines
Seongyoon Kim, University of Michigan
This paper tests for network complementarities in port infrastructure by examining whether Roll-On Roll-Off (RORO) upgrades at Fillipino ports generate bilateral trade gains beyond the sum of individual port effects. Using port-to-port commodity flow data, I find that routes where both ports have RORO trade 23% more than predicted by the individual effects alone. I also propose an interaction event study to investigate the dynamic effects and find evidence that these effects show zero pretrends and have positive dynamic effects. I embed these estimates in an Eaton-Kortum model with island geography and show that complementarity generates a superadditivity premium, implying coordinated port investments dominate sequential upgrades.