Transport costs, distance, and time : evidence from the Japanese Census of Logistics

Geographic distance is a standard proxy for transport costs under the simple assumption that freight fees increase monotonically over space. Using the Japanese Census of Logistics, this paper examines the extent to which transport distance and time affect freight costs across shipping modes, commodity groups, and prefecture pairs. The results show substantial heterogeneity in transport costs and time across shipping modes. Consistent with an iceberg formulation of transport costs, distance has a significantly positive effect on freight costs by air transportation. However, I find the puzzling results that business enterprises are likely to pay more for short-distance shipments by truck, ship, and railroad transportation. As a plausible explanation, I discuss aggregation bias arising from freight-specific premiums for timely, frequent, and small-batch shipments.

Do international flights promote FDI? : the role of face-to-face communication

Air transportation facilitates face-to-face interactions across borders for the spatial expansion of manufacturing production. I investigate the impact of international flights on FDI entry by Japanese firms. I find that FDI entry significantly increases with the weekly frequency of flights from Japan, and the positive impact increases with a proxy for an intensity of face-to-face communication between the parent firm and foreign affiliate. The results are robust to estimation methods, additional control variables, and definitions of face-to-face communication. Thus, the results suggest that flights encourage FDI entry through a reduction in face-to-face communication costs.