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Natural disasters and trade: the mitigating impact of port substitution

Lookup NU author(s): Dr Wessel Vermeulen

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Abstract

We study the effect of natural disasters on port level exports. We model the interaction between firms and ports to study how strongly exports from one port are affected by changes in the cost of exporting at neighboring ports. We extend the standard trade model with heterogeneous firms to a multiple port structure where exporting is subject to port specific local transportation costs, port specific fixed export costs and international bilateral trade costs. We show that gravity distortion due to firm heterogeneity is conditional on the comparative advantage at the port level and resulting substitution of exports across ports. We present evidence of the substitution effect using the 2011 Great East Japan Earthquake, indicating that at least 40% of exports was substituted to other ports following the disaster. The substitution effects is strongest in technology intensive product categories, which suggests an interaction between supply chains and domestic trade costs.

Publication metadata

Author(s): Hamano M, Vermeulen WN

Publication type: Article

Publication status: Published

Journal: Journal of Economic Geography

Year: 2020

Volume: 20

Issue: 3

Pages: 809-856

Print publication date: 01/05/2020

Online publication date: 02/08/2019

Acceptance date: 10/07/2019

Date deposited: 26/06/2019

ISSN (print): 1468-2702

ISSN (electronic): 1468-2710

Publisher: Oxford University Press

URL: https://doi.org/10.1093/jeg/lbz020

DOI: 10.1093/jeg/lbz020

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