Determinants of Transport Costs for Inter-regional Trade

Abstract

This paper presents a microeconomic model of inter-regional freight transportation based on careful formulation of cost structure in trucking firm and market equilibrium, which takes into account the feature of transport service as a bundle of multiple characteristics. We estimate the parameters of the model using the micro-data of inter-regional freight flows from the 2005 Net Freight Flow Census in Japan. Estimation results show that the determinants of transport cost incorporated in the model have significant effects in the ways that the model predicts. The degree of competition also have significant effect on freight charge. It is shown that there exist significant scale economies with respect to lot size and long-haul economies. Quantitative extents of these effects are also demonstrated.