Logistics Costs and Competitiveness

Firm-level Data

The recent international trade literature has become heavily focused on firm- level phenomena (see Bernard et al., 2007 for a review). Although most firm- level work in international trade focuses on a single country, the World Bank's Enterprise Surveys dataset makes it possible to do cross-country work at the firm-level as well. As Table 3 shows, the 2001-2005 Enterprise Surveys dataset covers services as well as manufacturing, and has at least some observations on firms active in logistics-related sectors such as wholesale and retail trade, and transport. The sectoral coverage of the Enterprise Surveys data essentially mirrors the broad definition of logistics used in the analysis of national accounts (see above). For this reason, caution is again required in interpreting results due to differences in sectoral definitions between the national accounts and commercial reality, in particular as regards the inclusion of passenger services in the definition of transport.

Table 3: Availability of Enterprise Surveys Firm-level Data (2001-2005).

Sector	Number of Countries	Total Observations
Wholesale and Retail Trade (51-52)	98	10,188
Transport (60-63)	70	1,456

The primary interest in firm-level data as a descriptive tool lies in the possibility of estimating firm- and sector-level productivity for logistics providers. These measures can in principle provide detailed information on sector performance. As an example, I calculate simple labor productivity measures using the Enterprise Surveys data referred to in Table 3; attempts to estimate total factor productivity using the Levinsohn-Petrin methodology ran into numerical difficulties, and will need to be left for future research. To enable cross-country comparisons, I average the labor productivity estimates by country.

Figure 12 presents a non-parametric regression of logistics performance, as measured by the LPI, and labor productivity in the transport sector as captured in the Enterprise Surveys data. Although the sample is relatively small, there is a clear positive association between transport productivity and logistics performance: countries with more productive transport sectors tend to have higher overall logistics performance. Figure 13 repeats the analysis using productivity in wholesale and retail trade as the independent variable, with similar results. Although the relationship is weaker, there is still a noticeable positive association between productivity and logistics performance. The difference in strength between the associations evident in Figures 12 and 13 is perhaps due to the fact that transport plays a larger role in what is commonly referred to as the logistics sector than do wholesale and retail trade activities.

Figure 12: Non-parametric Regression of Logistics Performance on Labor Productivity in Transport.

Note: Data sourced from Enterprise Surveys (productivity data), and the Logistics Performance Index 2010. One outlier (Lebanon) has been excluded from the sample.

Figure 14 presents results of a non-parametric regression of labor productivity in transport on GDP per capita. Figure 15 repeats the regression using labor productivity in wholesale and retail trade, rather than transport. Results in both cases are in line with expectations: countries at higher income levels tend to have more productive logistics sectors. As was the case for the LPI as dependent variable, the relationship appears to be stronger for the transport sector than for wholesale and retail trade.

Figure 13: Non-parametric Regression of Labor Productivity in Transport on Per Capita Income.

Note: Data sourced from Enterprise Surveys (productivity data), and the World Development Indicators (per capita income). One outlier (Lebanon) has been excluded from the sample.

Figure 14: Non-parametric Regression of Labor Productivity in Wholesale and Retail Trade on Per Capita Income.

Note: Data sourced from Enterprise Surveys (productivity data), and the World Development Indicators (per capita income). One outlier (Lebanon) has been excluded from the sample.

More surprising are results in Figures 16 and 17, where the dependent variable is trade openness. In both cases, the data suggest that higher productivity in logistics is associated with a lesser degree of openness, which is contrary to expectations. The reasons for this result are as yet unclear. One possibility is that labor productivity is only a very approximate measure, and that results using total factor productivity might be different. Another possibility is that the data are primarily capturing the characteristics of domestic logistics firms, not those involved directly in international transactions. Presumably, productivity in international logistics operations would be positively associated with openness. However, these questions will need to be examined further in future research.

Figure 15: Non-parametric Regression of Trade Openness on Labor Productivity in Transport.

Note: Data sourced from Enterprise Surveys (productivity data), and the World Development Indicators (openness). One outlier (Lebanon) has been excluded from the sample.

Figure 16: Non-parametric Regression of Trade Openness on Labor Productivity in Wholesale and Retail Trade.

Note: Data sourced from Enterprise Surveys (productivity data), and the World Development Indicators (openness). One outlier (Lebanon) has been excluded from the sample.

The above analysis has only exploited one part of the Enterprise Surveys dataset, namely surveys undertaken between 2001 and 2005. Future research can exploit similar data from later surveys (Table 4). These new data offer the advantage of being disaggregated according to a more precise sectoral definition following the ISIC scheme. It will therefore be possible to examine the relationship between productivity in individual components of the logistics sector, and important economic outcomes, as well as overall logistics performance.

Table 4: Availability of Enterprise Surveys Firm-level Data (2006-2010).

Sector	Number of Countries	Total Observations
Wholesale Trade (51)	72	1,194
Retail Trade (52)	104	8,867
Land Transport (60)	65	600
Water Transport (61)	16	40
Air Transport (62)	24	35