University of Tennessee
Department of Economics
519 Stokely Management Center
Knoxville TN 37996
Institutional Affiliation: University of Tennessee
Information about this author at RePEc
NBER Working Papers and Publications
|January 2012||Time as a Trade Barrier|
with David Hummels: w17758
A large and growing share of international trade is carried on airplanes. Air cargo is many times more expensive than maritime transport but arrives in destination markets much faster. We model firms' choice between exporting goods using fast but expensive air cargo and slow but cheap ocean cargo. This choice depends on the price elasticity of demand and the value that consumers attach to fast delivery and is revealed in the relative market shares of firms who air and ocean ship. We use US imports data that provide rich variation in the premium paid for air shipping and in time lags for ocean transit to identify these parameters and extract consumer's valuation of time. By exploiting variation across US entry coasts we are able to control for selection and for unobserved shocks to prod...
Published: David L. Hummels & Georg Schaur, 2013. "Time as a Trade Barrier," American Economic Review, American Economic Association, vol. 103(7), pages 2935-59, December. citation courtesy of
|July 2009||Hedging Price Volatility Using Fast Transport|
with David L. Hummels: w15154
Purchasing goods from distant locations introduces a significant lag between when a product is shipped and when it arrives. This is problematic for firms facing volatile demand, who must place orders before knowing the resolution of demand uncertainty. We provide a model in which airplanes bring producers and consumers together in time. Fast transport allows firms to respond quickly to favorable demand realizations and to limit the risk of unprofitably large quantities during low demand periods. Fast transport thus provides firms with a real option to smooth demand volatility. The model predicts that the likelihood and extent to which firms employ air shipments is increasing in the volatility of demand they face, decreasing in the air premium they must pay, and increasing in the contempora...
Published: Hummels, David L. & Schaur, Georg, 2010. "Hedging price volatility using fast transport," Journal of International Economics, Elsevier, vol. 82(1), pages 15-25, September. citation courtesy of