Experience Stern | Faculty & Research

Overview: In the paper, “Investment in Infrastructure and Trade: The Case of Ports,” NYU Stern Professor Giulia Brancaccio and co-authors Myrto Kalouptsidi (Harvard University) and Theodore Papageorgiou (Boston College) examine the returns to investing in port infrastructure.

Why study this now: 80% of global trade is carried out by ships – totalling 11 billion tons and nearly $20 trillion dollars worth of commodities entering and leaving ports annually. Disruptions at ports can cause significant delays and costs – issues that were acutely obvious throughout the Covid-19 pandemic. This research explores the benefits to investing in port infrastructure, including reducing disruption costs and improving economic welfare. 

What the authors found: Focusing on international trade in raw commodities, the authors combine theoretical models and detailed data of time at ports (the time it takes for a ship to load or unload plus any time the ship waits in anchorage). The researchers’ results suggest that:

• The average ship is willing to pay $45,000 to reduce time at a port by one day – markedly higher than the daily cost of the ship ($14,000), suggesting that the value of time saved is of significant importance
• Investment in one port can have a spillover effect and decongest others nearby
• Not all investments should be considered equal: e.g., investing in East Coast and Gulf ports resulted in a higher return on investment than at the Great Lakes
• The more volatility there is, the more need for investment in order to dampen the effects of these shocks to the system

What does this change: When policymakers are planning investments in ports, they need to constantly consider the interconnected nature of these locations in order to maximize trade efficiency and economic gains.

Key insight: Disruptions in ports “are significantly costly,” say the authors. “This paper develops simple tools to address these issues.” However, investments “must be coordinated and targeted.”