The effect of containerization on transport costs is not significant, a result similar to that in Sanchez and others (2003). There are two potential explanations for why this might be. First, most shipped cargo is already in containers, so the rate of containerization does not capture technological changes, as it did in the past (previous studies included it as a proxy for technology). Second, containerization may not be the most reliable proxy for changes in technology. If the data were available, better proxies would be the carrying capacity of liners, the use of fuelefficient technologies, and on-ship facilities to organize cargo.

<mark>Our results on trade imbalance indicate that the availability of empty containers at the exporting port determines maritime transport costs. Larger flows of exports to the United States relative to imports from the United States mean that empty containers come to pick up exports, raising maritime transport costs. A 10 percent decrease in the trade imbalance, calculated as total country</mark> _<mark>j</mark>_ <mark>imports from the U.S. minus country</mark> _<mark>j</mark>_ <mark>exports to the U.S. as a ratio of total trade between the countries, increases maritime transport costs by about 2 percent. Exporting countries with higher GDP per capita face lower maritime transport costs for their exports, as a consequence of better trade infrastructure and services.</mark> The proxy for markups (liner shipping connectivity) is not significant, although it has the correct sign. Identifying proper markups of maritime transport costs and finding reasonable and statistically significant estimates is a challenge. The markup variables do not always yield the expected result and are sensitive to omitted variables (see Clark, Dollar, and Micco 2004 for a discussion). It would have been ideal to control for other policy measures that affect liner shipping services, as Bertho, Bochert, and Mattoo (2014) do. Although the World Bank’s Services Trade Restriction Database is a rich resource for maritime cost studies, it includes only a single year entry for various countries.<sup>14</sup> We tested the effects of services trade restrictions in our panel set-up but decided to drop it because of the limited variation over time.

The analysis indicates that differences in port performance in the Indian and Western Pacific Oceans explain differences in maritime transport costs: The more efficient the port, the lower the maritime transport costs. A 0.1 increase in efficiency levels for the port sector in a country reduces the maritime transport costs of its exports to the United States by 2.3 percent. Raising port efficiency from the 25th to the 75th percentile reduces transport costs by about 3.6 percent.<sup>15</sup> How ports employ their facilities thus has a direct effect on transport costs.

Figure 3 presents the average cost savings by country if ports had performed as well as the best performing port in our sample. Becoming as efficient as the most efficient country (Sri Lanka)

> 14 http://iresearch.worldbank.org/servicetrade/aboutData.htm.

> 15 The 75th percentile and 25th percentiles equal 0.513 and 0.357, respectively. The size effect is

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