Transportation Mode Choice and International Fragmentation of Production: Evidence from a Developing Country

Abstract

ABSTRACT The objective of this study is to analyze the effects of fragmentation of production measured by the parts and components trade on the choice of transportation mode including air, sea and road. The paper attempts to account for the advantages and disadvantages of alternative transportation modes in short-, medium- and long-distance trade. Using a detailed data set (Harmonized System12-digit product level statistics for the period 2006–2014 and 143 countries) of Turkey’s machinery exports, we show that fragmentation of production plays a significant role in the selection of the transportation mode. In particular, road transportation with good infrastructure is a significant trade facilitating mode of transportation for nearby trade partners when trade involves P&C and bulky products.