Essays on the Industrial Organization of Ocean Shipping

Abstract

This dissertation consists of two chapters on the industrial organization of ocean shipping. In the first chapter, I study the investment decisions of US ports. Transportation infrastructure is characterized by two opposing forces: economies of scale that encourage centralization, and spread-out consumers that encourage dispersion. These forces may not be correctly balanced in the United States as decisions are made by many different regional authorities which receive large federal subsidies. I study seaports during a period when those on the East Coast were making investments to prepare for the larger vessels that could navigate an expanded Panama Canal. With data on all container imports and capital costs of major US ports, I estimate a model of the investment game that port authorities play. Competing ports invest more than a social planner would, even allowing for deviations from profit maximization, because they do not internalize their business stealing effects on others. In particular, the $1.7 billion expansion of the Port of New York and New Jersey would not have been chosen by a coastal authority. Social surplus would be over a billion dollars higher with coordination, the equivalent of about one year's worth of revenue for all the East Coast ports. Lowering federal subsidies appears to lower much of the gap. In the second chapter, I show how port productivity changed after a historic labor agreement. Across many industries, employers and workers often argue over technology adoption. In 2008, the International Longshore and Warehouse Union signed a contract agreeing that all ports on the US West Coast could fully automate their terminals, recognizing there would be job losses. Using a new, ship-level dataset of the labor it takes to unload ships, I study changes in productivity after the contract was signed and after one port automated. Having the ship-level data is important, as I show more aggregate measures would produce misleading estimates. I find productivity increased about 25% as a result of the new contract and an additional 15% among the port that actually automated. I find that the effects did not completely persist through the 2015 contract, even though the automation clause did not change, and suggest possible ways employee-employer relations may alter outside the written contract.