Logistics performance index in international trade: case of Central and Eastern European and Western Balkans countries
Abstract
The volume of international trade heavily depends on factors facilitating trade and contributing to reducing its costs. The importance of international logistics as trade facilitator is increasingly emphasised in the literature. The aim of the paper is to assess the level of the impact of logistics performance on trade volume in the Central and Eastern European countries (CEECs) and Western Balkans. In order to achieve the aim, the impact of Logistic Performance Index (LPI) on international trade in 2007 and 2018 is investigated. This relationship is examined using the gravity model approach with a focus on overall LPI and its components. The research results show that there is a positive statistical significance and impact of logistics on bilateral trade between CEECs, and logistics justifies the role of a trade facilitator. Besides, the importance of LPI components in intensifying international trade was emphasised. Research implications indicate that improving logistics performance and logistics services lead to a positive impact on the volume of international trade. Better logistics performance in trading countries will lead to increased bilateral trade and reduced trade costs. The limitation of the research is that only two years have been taken into account. This is done in order to highlight the differences between the year the LPI was introduced, and the last year the LPI was calculated.
Keyword : logistics performance index (LPI), international trade, logistics, Gravity model, trade facilitation, Central and Eastern European Countries (CEECs), Western Balkans
How to Cite
Bugarčić, F. Ž., Skvarciany, V., & Stanišić, N. . (2020). Logistics performance index in international trade: case of Central and Eastern European and Western Balkans countries. Business: Theory and Practice, 21(2), 452-459. https://doi.org/10.3846/btp.2020.12802
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Mejia, A., Soloaga, I., & Wilson, J. S. (2006). Moving forward faster: trade facilitation reform And Mexican competitiveness. The World Bank. https://doi.org/10.1596/1813-9450-3953
Moïsé, E., & Sorescu, S. (2013). Trade facilitation indicators: the potential impact of trade facilitation on developing countries. OECD Trade Policy Papers, 144. https://doi.org/10.1787/5k4bw6kg6ws2-en
Prehn, S., Brümmer, B., & Glauben, T. (2016). Gravity model estimation: fixed effects vs. random intercept Poisson pseudo-maximum likelihood. Applied Economics Letters, 23(11), 761–764. https://doi.org/10.1080/13504851.2015.1105916
Puertas, R., Martí, L., & García, L. (2014). Logistics performance and export competitiveness: European experience. Empirica, 41(3), 467–480. https://doi.org/10.1007/s10663-013-9241-z
Shepherd, B. (2011). Logistics costs and competitiveness: measurement and trade policy applications. Transport Research Support Working Paper, World Bank. https://elibrary.worldbank.org/doi/abs/10.1596/26724
Saslavsky, D., & Shepherd, B. (2012). Facilitating international production networks: the role of trade logistics. World Bank Group. https://doi.org/10.1596/1813-9450-6224
Shepherd, B. (2017). Infrastructure, trade facilitation, and network connectivity in Sub-Saharan Africa. Journal of African Trade, 3(1–2), 1. https://doi.org/10.1016/j.joat.2017.05.001
Vido, E., & Prentice, B. E. (2003). The use of proxy variables in economic gravity models: a cautionary note. Journal of the Transportation Research Forum, 57(1), 123–137.
Vlahinić Lenz, N., Pavlić Skender, H., & Mirković, P. A. (2018). The macroeconomic effects of transport infrastructure on economic growth: the case of Central and Eastern EU member states. Economic Research-Ekonomska Istraživanja, 31(1), 1953–1964. https://doi.org/10.1080/1331677X.2018.1523740
Wang, M. L., & Choi, C. H. (2018). How logistics performance promote the international trade volume? A comparative analysis of developing and developed countries. International Journal of Logistics Economics and Globalisation, 7(1), 49–70. https://doi.org/10.1504/IJLEG.2018.090504
Wilson, J. S., Mann, C. L., & Otsuki, T. (2005). Assessing the potential benefit of trade facilitation: A global perspective. In P. Dee & M. Ferrantino (Eds.), Quantitative methods for assessing the effects of non-tariff measures and trade facilitation (pp. 121–160). Co-published with APEC secretariat. https://doi.org/10.1142/9789812701350_0008
World Bank. (2020). Logistics Performance Index. https://lpi.worldbank.org/about
Anderson, J. E. (1979). A theoretical foundation for the gravity equation. American Economic Review, 69(1), 106–116.
Arvis, J. F., Mustra, M. A., Panzer, J., Ojala, L., & Naula, T. (2007). Connecting to compete: Trade logistics in the global economy. World Bank group. https://doi.org/10.1596/24600
Arvis, J. F., Saslavsky, D., Ojala, L., Shepherd, B., Busch, C., Raj, A., & Naula, T. (2016). Connecting to compete 2016: trade logistics in the global economy – the logistics performance index and its indicators. World Bank, Washington, DC. https://doi.org/10.1596/24598
Behar, A., & Nelson, B. D. (2009). Exports and logistics. Economics Series Working Papers, 439.
Bensassi, S., Márquez-Ramos, L., Martínez-Zarzoso, I., & Suárez-Burguet, C. (2015). Relationship between logistics infrastructure and trade: Evidence from Spanish regional exports. Transportation Research Part A: Policy and Practice, 72, 47–61. https://doi.org/10.1016/j.tra.2014.11.007
Bergstrand, J. H. (1985). The gravity equation in international trade: some microeconomic foundations and empirical evidence. The Review of Economics and Statistics, 67(3), 474. https://doi.org/10.2307/1925976
Bergstrand, J. H. (1989). The generalised gravity equation, monopolistic competition, and the factor-proportions theory in international trade. The Review of Economics and Statistics, 71(1), 143–153. https://doi.org/10.2307/1928061
Brun, J.-F., Carrè, C., Guillaumont, P., & De Melo, J. (n.d.). Has distance died? Evidence from a Panel Gravity Model. The World Bank Economic Review, 19(1), 99–120. https://doi.org/10.1093/wber/lhi004
Çelebi, D. (2019). The role of logistics performance in promoting trade. Maritime Economics & Logistics, 21(3), 307–323. https://doi.org/10.1057/s41278-017-0094-4
Chin-Chia, J. (2011). Performance evaluation of logistics systems under cost and reliability considerations. Transportation Research Part E: Logistics and Transportation Review, 47(2), 130–137. https://doi.org/10.1016/j.tre.2010.09.012
D’Aleo, V., & Sergi, B. S. (2017). Does logistics influence economic growth? The European experience. Management Decision, 55(8), 1613–1628. https://doi.org/10.1108/MD-10-2016-0670
Devlin, J., & Yee, P. (2005). Trade logistics in developing countries: the case of the Middle East and North Africa. The World Economy, 28(3), 435–456. https://doi.org/10.1111/j.1467-9701.2005.00620.x
Engman, M. (2005). The economic impact of trade facilitation. OECD Trade Policy Papers, 21. https://doi.org/10.1787/861403066656
Evenett, S. J., & Keller, W. (2002). On theories explaining the success of the gravity equation. Journal of Political Economy, 110(2), 281–316. https://doi.org/10.1086/338746
Felipe, J., & Kumar, U. (2012). The role of trade facilitation in Central Asia. Eastern European Economics, 50(4), 5–20. https://doi.org/10.2753/EEE0012-8775500401
Gani, A. (2017). The logistics performance effect in international trade. The Asian Journal of Shipping and Logistics, 33(4), 279–288. https://doi.org/10.1016/j.ajsl.2017.12.012
Greaney, T. M., & Kiyota, K. (2020). The gravity model and trade in intermediate inputs. The World Economy, twec.12947. https://doi.org/10.1111/twec.12947
Halaszovich, T. F., & Kinra, A. (2018). The impact of distance, national transportation systems and logistics performance on FDI and international trade patterns: Results from Asian global value chains. Transport Policy (In Press). https://doi.org/10.1016/j.tranpol.2018.09.003
Hausman, W. H., Lee, H. L., & Subramanian, U. (2013). The impact of logistics performance on trade. Production and Operations Management, 22(2), 236–252. https://doi.org/10.1111/j.1937-5956.2011.01312.x
Host, A., Pavlić Skender, H., & Zaninović, P. A. (2019). Trade logistics – the gravity model approach. Zbornik Radova Ekonomskog Fakulteta u Rijeci: Časopis Za Ekonomsku Teorijui Praksu/Proceedings of Rijeka Faculty of Economics: Journal of Economics and Business, 37(1), 327–342. https://doi.org/10.18045/zbefri.2019.1.327
Korinek, J., & Sourdin, P. (2011). To what extent are high-quality logistics services trade facilitating? OECD Trade Policy Working Papers, 108. https://doi.org/10.1787/5kggdthrj1zn-en
Marimoutou, V., Peguin, D., & Peguin-Feissolle, A. (n.d.). The “distance-varying” gravity model in international economics: is the distance an obstacle to trade? HAL. https://halshs.archives-ouvertes.fr/halshs-00536127
Martí, L., Puertas, R., & García, L. (2014). The importance of the Logistics Performance Index in international trade. Applied Economics, 46(24), 2982–2992. https://doi.org/10.1080/00036846.2014.916394
Mejia, A., Soloaga, I., & Wilson, J. S. (2006). Moving forward faster: trade facilitation reform And Mexican competitiveness. The World Bank. https://doi.org/10.1596/1813-9450-3953
Moïsé, E., & Sorescu, S. (2013). Trade facilitation indicators: the potential impact of trade facilitation on developing countries. OECD Trade Policy Papers, 144. https://doi.org/10.1787/5k4bw6kg6ws2-en
Prehn, S., Brümmer, B., & Glauben, T. (2016). Gravity model estimation: fixed effects vs. random intercept Poisson pseudo-maximum likelihood. Applied Economics Letters, 23(11), 761–764. https://doi.org/10.1080/13504851.2015.1105916
Puertas, R., Martí, L., & García, L. (2014). Logistics performance and export competitiveness: European experience. Empirica, 41(3), 467–480. https://doi.org/10.1007/s10663-013-9241-z
Shepherd, B. (2011). Logistics costs and competitiveness: measurement and trade policy applications. Transport Research Support Working Paper, World Bank. https://elibrary.worldbank.org/doi/abs/10.1596/26724
Saslavsky, D., & Shepherd, B. (2012). Facilitating international production networks: the role of trade logistics. World Bank Group. https://doi.org/10.1596/1813-9450-6224
Shepherd, B. (2017). Infrastructure, trade facilitation, and network connectivity in Sub-Saharan Africa. Journal of African Trade, 3(1–2), 1. https://doi.org/10.1016/j.joat.2017.05.001
Vido, E., & Prentice, B. E. (2003). The use of proxy variables in economic gravity models: a cautionary note. Journal of the Transportation Research Forum, 57(1), 123–137.
Vlahinić Lenz, N., Pavlić Skender, H., & Mirković, P. A. (2018). The macroeconomic effects of transport infrastructure on economic growth: the case of Central and Eastern EU member states. Economic Research-Ekonomska Istraživanja, 31(1), 1953–1964. https://doi.org/10.1080/1331677X.2018.1523740
Wang, M. L., & Choi, C. H. (2018). How logistics performance promote the international trade volume? A comparative analysis of developing and developed countries. International Journal of Logistics Economics and Globalisation, 7(1), 49–70. https://doi.org/10.1504/IJLEG.2018.090504
Wilson, J. S., Mann, C. L., & Otsuki, T. (2005). Assessing the potential benefit of trade facilitation: A global perspective. In P. Dee & M. Ferrantino (Eds.), Quantitative methods for assessing the effects of non-tariff measures and trade facilitation (pp. 121–160). Co-published with APEC secretariat. https://doi.org/10.1142/9789812701350_0008
World Bank. (2020). Logistics Performance Index. https://lpi.worldbank.org/about