Data

In the theoretical models, it is assumed that road capacity affects ports’ throughputs only through the change of road congestion. However, in reality, road capacity expansion may affect the ports’ competition through other channels. For example, holding the road congestion unchanged, an increase in urban road capacity may imply an improvement in the accessibility to the hinterland by, for instance, having shorter routes and thus attracting more shippers. On the other hand, an increase in urban road supply may suggest an improvement in the connectivity to the rival port nearby, consequently intensifying the port competition. Furthermore, an investment in urban road capacity may be accompanied by an investment in other transport infrastructure in and outside of the urban area, reducing the cost of using other transportation modes, such as air, rail and long-distance trucking. As a result, local firms may change their sourcing destinations, as well as transportation modes, and these factors may eventually affect the demands of maritime shipping. Therefore, it is of interest to distinguish the effect of road capacity investment through road congestion from other channels. In view of this, we consider the model that controls for the road congestion while estimating the impact of road capacity investment through other factors:

lnXit ¼ δ0 þ δ1 ln Tt þ δ2 lnPit þ δ3 lnDit þ δ4 lnDRit þ δ5 ln LMit þ δ6 ln LMRit þ δ7 ln LMitð Þ2 þ δ8 ln LMRitð Þ2 þ δ9 ln LMitð Þ ln LMRitð Þ þ ωi þ fit;

(7)

where ωi = the fixed effect for port i and fit = the error term for port i in year t.