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Building Bridges: The Effect of Major Infrastructure Development on Trade

Persson, Maria LU ; Soegaard, Christian and Welander Tärneberg, Anna LU (2022) In Working Papers
Abstract
We provide evidence of a positive effect of major infrastructure development on international trade, using the opening of the fixed link between Denmark and Sweden in 2000 (The Oresund Bridge) as a quasi-natural experiment. Our Synthetic Control Method (SCM) constructs a counterfactual Danish-Swedish trade relationship, which represents bilateral trade in the absence of the bridge. Evaluating actual trade against its synthetic counterpart for the period 2001-2008 shows that Danish-Swedish trade was 24.6% larger than it would have been in the absence of the bridge using our preferred specification. The result is robust to standard sensitivity checks. We supplement our analysis with a standard Difference-in-differences (DiD) estimator, which... (More)
We provide evidence of a positive effect of major infrastructure development on international trade, using the opening of the fixed link between Denmark and Sweden in 2000 (The Oresund Bridge) as a quasi-natural experiment. Our Synthetic Control Method (SCM) constructs a counterfactual Danish-Swedish trade relationship, which represents bilateral trade in the absence of the bridge. Evaluating actual trade against its synthetic counterpart for the period 2001-2008 shows that Danish-Swedish trade was 24.6% larger than it would have been in the absence of the bridge using our preferred specification. The result is robust to standard sensitivity checks. We supplement our analysis with a standard Difference-in-differences (DiD) estimator, which uses fixed effects. The DiD estimator yields a slightly larger trade effect of 26.7%, and is robust to a number of sensitivity analyses, including estimation at the product level. Both our SCM and DiD point to the trade-boosting effects being gradual. (Less)
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author
; and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
Fixed link, bridge, tunnel, transport infrastructure, trade, Synthetic Control Method, Difference-in-differences, F14, F15
in
Working Papers
issue
2022:3
pages
50 pages
language
English
LU publication?
yes
id
7c870128-5617-47a7-b897-091d12653879
date added to LUP
2022-02-25 15:29:20
date last changed
2024-03-11 15:12:13
@misc{7c870128-5617-47a7-b897-091d12653879,
  abstract     = {{We provide evidence of a positive effect of major infrastructure development on international trade, using the opening of the fixed link between Denmark and Sweden in 2000 (The Oresund Bridge) as a quasi-natural experiment. Our Synthetic Control Method (SCM) constructs a counterfactual Danish-Swedish trade relationship, which represents bilateral trade in the absence of the bridge. Evaluating actual trade against its synthetic counterpart for the period 2001-2008 shows that Danish-Swedish trade was 24.6% larger than it would have been in the absence of the bridge using our preferred specification. The result is robust to standard sensitivity checks. We supplement our analysis with a standard Difference-in-differences (DiD) estimator, which uses fixed effects. The DiD estimator yields a slightly larger trade effect of 26.7%, and is robust to a number of sensitivity analyses, including estimation at the product level. Both our SCM and DiD point to the trade-boosting effects being gradual.}},
  author       = {{Persson, Maria and Soegaard, Christian and Welander Tärneberg, Anna}},
  keywords     = {{Fixed link; bridge; tunnel; transport infrastructure; trade; Synthetic Control Method; Difference-in-differences; F14; F15}},
  language     = {{eng}},
  note         = {{Working Paper}},
  number       = {{2022:3}},
  series       = {{Working Papers}},
  title        = {{Building Bridges: The Effect of Major Infrastructure Development on Trade}},
  url          = {{https://lup.lub.lu.se/search/files/173633779/WP22_3.pdf}},
  year         = {{2022}},
}