# Smooth Sailing: Powering Global Trade Through Port Infrastructure Investment

1 Research Highlights June 14, 2024 ![Giulia Brancaccio headshot](/sites/default/files/styles/246w/public/2024-06/gbrancaccio.png?itok=emWHmeZN)>

**Overview:** In the paper, “[Investment in Infrastructure and Trade: The Case of Ports](https://www.nber.org/papers/w32503),” NYU Stern Professor [Giulia Brancaccio](https://www.stern.nyu.edu/faculty/bio/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.”