Building Bridges: The Effect of Major Infrastructure Development on Trade

Maria Persson, Christian Soegaard, Anna Welander Tärneberg

Research output: Working paper/PreprintWorking paper

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Abstract

We provide evidence of a positive effect of major infrastructure development on international trade, using the opening of the fixed link between Denmark and Sweden in 2000 (The Oresund Bridge) as a quasi-natural experiment. Our Synthetic Control Method (SCM) constructs a counterfactual Danish-Swedish trade relationship, which represents bilateral trade in the absence of the bridge. Evaluating actual trade against its synthetic counterpart for the period 2001-2008 shows that Danish-Swedish trade was 24.6% larger than it would have been in the absence of the bridge using our preferred specification. The result is robust to standard sensitivity checks. We supplement our analysis with a standard Difference-in-differences (DiD) estimator, which uses fixed effects. The DiD estimator yields a slightly larger trade effect of 26.7%, and is robust to a number of sensitivity analyses, including estimation at the product level. Both our SCM and DiD point to the trade-boosting effects being gradual.
Original languageEnglish
Number of pages50
Publication statusPublished - 2022

Publication series

NameWorking Papers
PublisherLund University, Department of Economics
No.2022:3

Subject classification (UKÄ)

  • Economics

Free keywords

  • Fixed link
  • bridge
  • tunnel
  • transport infrastructure
  • trade
  • Synthetic Control Method
  • Difference-in-differences
  • F14
  • F15

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