PublicDisclosureAuthorized PublicDisclosureAuthorized PolicyResearchWorkingPaper10533 EstimatingRoadFreightTransportCostsinEasternEuropeandCentralAsiaUsingLargeShippingData AtsushiIimi TransportGlobalPracticeJuly2023 PolicyResearchWorkingPaper10533 Abstract Therecentglobalcrises,suchastheCOVID-19crisis,remindusoftheimportanceofefficienttransportationandlogistics.Notably,however,evenbeforethecrises,someregionswerealreadyexperiencingagradualincreaseinfreightcosts,withmoreandmoreemptytrucksobserved.Thepaperrecastslightonthequestionofhowroadfreightcostsaredeterminedusinglarge,uniqueshippingdatafromEasternEuropeanandCentralAsiancountries.Itfindsthateconomiesofscalearesignificantinbothfreightweightorloadfactoranddistance.Theelasticitywithrespecttofreightweightisparticularlyhighatabout0.3to1.0inabsoluteterms.Thus,tocontaintruckingcosts,itis importanttomaximizetheloadfactorthroughfreightcon-solidationatoriginsanddestinations.Theelasticitywithrespecttodistanceisrelativelymodestat0.04to0.16inabsolutetermsbutstillstatisticallysignificant,indicatingthatdistancemaynotnecessarilybeaconstraintontradeandregionalintegration.Truckingcostsalsodecreasewithdrivingspeed,aproxyforefficiencyofmovementsorroadconditions.Theelasticityissignificantforfoodproducts(−0.03)andotherconsumergoods(−0.11).Finally,thepaperfindsthatbordercrossingadds3–4percenttofreightcosts. ThispaperisaproductoftheTransportGlobalPractice.ItispartofalargereffortbytheWorldBanktoprovideopenaccesstoitsresearchandmakeacontributiontodevelopmentpolicydiscussionsaroundtheworld.PolicyResearchWorkingPapersarealsopostedontheWebathttp://www.worldbank.org/prwp.Theauthormaybecontactedataiimi@worldbank.org. ThePolicyResearchWorkingPaperSeriesdisseminatesthefindingsofworkinprogresstoencouragetheexchangeofideasaboutdevelopmentissues.Anobjectiveoftheseriesistogetthefindingsoutquickly,evenifthepresentationsarelessthanfullypolished.Thepaperscarrythenamesoftheauthorsandshouldbecitedaccordingly.Thefindings,interpretations,andconclusionsexpressedinthispaperareentirelythoseoftheauthors.TheydonotnecessarilyrepresenttheviewsoftheInternationalBankforReconstructionandDevelopment/WorldBankanditsaffiliatedorganizations,orthoseoftheExecutiveDirectorsoftheWorldBankorthegovernmentstheyrepresent. ProducedbytheResearchSupportTeam EstimatingRoadFreightTransportCostsinEasternEuropeandCentralAsiaUsingLargeShippingData AtsushiIimi¶† Eastern&SouthernAfrica,TransportTheWorldBank Keywords:Roadfreightrates,shippingcosts,regionalintegration.JELclassification:R41;C21;O52. ¶Correspondingauthor. †ThispaperisabackgroundpaperoftheShrinkingEconomicDistancestudy. I.Introduction 1.Inrecentyears,transportationcostshavebeenincreasingallovertheworldbecauseofvariousexternalshocks,suchastheCoronavirusDisease2019(COVID-19)crisis,remindingusoftheimportanceofefficienttransportandtrade.1Becauseofthestagnationandfaster-than-expectedrecoveryinglobaltradeandoutputs,internationalshippingremainsconstrained.Shortagescontinueinlogisticalequipment,containers,serviceoperators,suchastruckdriversandportoperators,andcargovessels(UNCTAD,2021).MaritimefreightratesreachedoverUS$10,000per40-footcontainerin2021,fivetimeshigherthanthelevelpriortotheCOVIDcrisis(Figure1).Roadtransportcostsarealsoincreasing.AccordingtoEurostat,theharmonizedconsumerpriceindexfortransportjumpedfrom106.7in2020to127.6in2022,a20-percentagepointincreaseforthelasttwoyears(Figure2). Figure1.GlobalMaritimeFreightRatesFigure2.TransportCPIinEU Source:Drewry.Source:Eurostat. 2.Notably,however,evenbeforetheCOVIDcrisis,someregions,suchasEurope,observedanincreasingtrendoffreightcosts.Variousreasonsexist.First,fuelpricesincreased.Particularly,dieselpriceswereonaverage0.99eurosin2016butincreasedto1.40eurosin2019andabout2eurosin2022(Figure3).Thishadasignificantimpactonfreightratesbecausedieselcostsaccountforone-thirdtoone-halfofthetotaltransportoperatingcosts.Second,truckdriversareinsufficient.Agingworkforceinthemarketisastructuralchallenge,puttingmorepressureto 1Thefollowinganalysisexaminestheperiodfrom2010to2020.TheimpactoftheCOVIDcrisismaynotbereflectedsufficientlyinourdataset. increasedrivers’wages.Whiledriversover55yearsoldaccountfor34percentofthetotallaborforceinthissectorinEurope,only7percentareunder25yearsold(Tietal.,2022). 3.Loadfactorisanimportantdeterminantoffreightrates.InEurope,theshareofroadfreightkilometerscarriedbyemptyvehicleshasbeenincreasingespeciallyforinternationalfreight(Figure4).Fromtheefficiencypointofview,holdingeverythingelseconstant,freightratesmaybehigherwhentherearemoreemptycontainers.Freightratesarealsodeterminedbytheroadcondition.Thehigherqualityofroadsgenerallyleadstolowerfreightrates.Intheory,roadusercosts,includingvehicleoperatingandmaintenancecostsanddrivers’timecosts,canbereducedifroadsarewellmaintained.Roadroughnessisnegativelyassociatedwithdrivingspeed(e.g.,Alessandronietal.,2017).However,therelationshipamongroadconditions,trafficspeedandfreightratesmaybecomplicatedbyotherfactorsinvolved,suchasthetruckingindustry’smarketstructure.Gi