On the Historical Relationship between Port (In)Efficiency and Transport Costs in the Developing World

Do differences in port performance explain differences in maritime transport costs? How much would improvements in port performance reduce maritime transport costs in developing countries? To answer this question, we use a widely used transport cost model, but we provide a new measure of port efficiency, estimated through a non-parametric approach. Relying on data from the early 2000s, this paper shows that for a sample of 115 container ports in 39 developing countries, becoming as efficient as the country with the most efficient port sector would reduce average maritime transport costs by 5 percent. For the most inefficient country, the reduction in transport costs could reach 15 percent. These findings point out the potential gains that can be achieved from the combination of betterquality investment and more efficient service provision in the port sector. The estimates in this paper cannot be updated because the databases were discontinued and it therefore highlights the need to generate data to evaluate the effectiveness of public policies that are key to competitiveness.