Topography and Trade Routes: How Geography Shapes World Trade Patterns

Keywords: International Trade, Sea Routes.
Session Type: Virtual Paper Abstract
Day: Tuesday
Session Start / End Time: 3/1/2022 05:20 PM (Eastern Time (US & Canada)) - 3/1/2022 06:40 PM (Eastern Time (US & Canada))
Room: Virtual 69

Abstract

Extensive work in international relations discusses how geographic factors, such as distance, influence trade patterns. The gravity model predicts that the closer two states are to each other, the higher their propensity to trade. In this paper, I expand on how geography affects international trade by discussing the physical shape of the world's landmasses and states' distance to international sea routes. I use new data from the United Nations Commission on Trade and Development to show that state access to sea routes is a causal determinant of international trade. I use a two-stage linear regression model with world topography as an instrumental variable to make the causal claim. The physical shape of the world affects the prominence of different countries in international sea routes. This prominence affects a countries trade volume. Since around ninety percent of all trade occurs via sea, international sea routes are a critical part of the worldwide economy that has so far been ignored by trade scholars. This paper's results help explain a variety of aspects of the world economy, such as the East Asian Tigers, U.S. trade patterns with small distant countries, and the inability of some countries to attract international investment.