Distance to the Port and Competitiveness in Colombian Manufacturing Sector
Castillo Carrillo, Leyla
This paper analyzes the impact of the distance to the port on firms' production in Colombia's manufacturing sector. A simple statistical model, using detailed firm-level survey data, measures the effect of distance to port on firms' level of production, controlling for regular inputs of production and basic traits such as industry and size. The hypothesis tested is whether distance to the port does play a significant role in explaining variation of firms' production other characteristics being equal. Econometric results show that distance to port is not a significant determinant of productivity, ceteris paribus, for firms that export little or none of their production, but it is an important determinant of productivity for exporting firms. As the proportion of total production exported by the firm increases, the impact, of being farther away from the coast, on production decreases. A rough estimate of the needed reduction on transportation costs, measured in terms of a reduction in the average physical distance from exporting firms to the port, is 1,290 km. This reduction would be needed in order to compensate a planned total investment of COL$38.5 trillions in a period of fifteen years. The impact of government investments on transport infrastructure has multiple dimensions. A comprehensive analysis of the cost effectiveness of these investments would require additional data and tools that are beyond the scope of this paper. This paper concludes that the government agenda to invest in transport infrastructure to improve competitiveness is in the right direction, but it is urgent to estimate more precisely the level of required investments that would lead to the desired improvement in trade competitiveness. By doing this, the government would have better tools to target and prioritize the specific investments in the overall policy agenda for infrastructure and competitiveness.
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