All aboard: The effects of port development

Abstract

Seaports facilitate the fast flow of goods across space, but ports also entail local costs borne by host cities. We use the introduction of containerized shipping to explore the effects of port development. At the local level, we find that seaport development increases city population by making a city more attractive, but this market access effect is offset by costs which make the city less attractive. At the aggregate level, we find that the local costs associated with port development are heterogeneous across cities and reduce aggregate welfare gains. Net of the costs, our results suggest that containerization in seaports increased world welfare by 3.4%.