Shipping inside the Box: Containerization and Trade

We quantify the effect of container technology on transport costs and trade by estimating the modal choice between containerization and breakbulk shipping using micro-level trade data. The model is motivated by novel facts that relate container usage to shipment, destination and firm characteristics. We find container transport to have a higher first-mile cost and a lower distance elasticity, making it cost effective in longer distances. At the median distance across all country pairs, the container decreases variable shipping costs between 16 and 22%. Containerization explains a significant amount of the global trade increase since its inception: a quantitative exercise suggests that, in the absence of containers, Turkish and U.S. maritime exports in a typical sector to the average destination market would have been about two-thirds, and aggregate maritime exports 14 to 21% lower than what they are today, respectively.