Market Structure, Freight Rate Dispersion, and Firm Size Distribution of Importing Firms Over Time

Contrary to the common assumption of symmetric trade costs, we document that, even within a narrowly defined product and route, the maritime international freight rates are highly dispersed across importing firms. Specifically, even after controlling for the product price, shipment size, month and carrier, the freight rate decreases in the firm’s annual import size: doubling the size corresponds to a 3.5% decrease in the freight rate with the resulting difference between the largest and smallest sizes of up to 19%. The degree of freight rate dispersion depends on the degree of competition among carriers: it decreases in the concentration of carriers on a route and eventually disappears on routes with only one carrier. There is also a varying dynamic ‘Walmart’ effect. Routes with the greater freight rate dispersion, over time, experience a higher concentration of importing firms. Our findings are robust to multiple robustness checks, including controlling for the exporting firm size.