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Do Larger Importing Firms Face Lower Freight Rates?

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Document pages: 37 pages

Abstract: This paper documents that, even within a narrowly defined product and port-to-port route, the maritime international freight rates are lower for larger importing firms. Even after controlling for shipment sizes, the 90th-percentile importing firm faces a 20 lower freight rate and, as a result, a 1.8 lower delivered price for a given product and route than the 10th-percentile firm. The firm size matters only in the presence of some degree of competition among shippers — monopoly shippers charge a higher, but symmetric freight rates across all firms. These results are consistent with our theoretical predictions and are robust to multiple robustness checks, including controlling for the size of an exporting firm. We further argue that asymmetries in access to imports affect input prices, TFP estimation, and magnify the extent of firm size heterogeneity.

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