Logistics, Trade and Production Networks: An Empirical Investigation

Abstract: Logistics services contribute to not only expansion in trade and production networks within or across countries but also help to build countries’ productive capacities. With production processes and tasks in production increasingly fragmented across borders, time-sensitive logistics services along with information and communication technology can be the key to facilitate production networks. The analysis in this study provides a synoptic view of the role of logistics in promoting such production networks across borders. It undertakes a case study of two products: India’s export of yarn to Bangladesh and India’s import of air-conditioning equipment from Thailand. It is observed that improvements in logistics services can significantly increase trade volumes through production networks across borders. Also, there exists such a longrun relationship between trade and logistics performance that the causal link can be in both directions. In terms of policy, this paper suggests that efficient performance in logistics contributes positively to trade, which, in turn, promotes production networks across borders. A regional logistics sector policy focusing on narrowing logistics gaps is thereby important to facilitate trade and production networks in Asia and the Pacific.

Keywords: Logistics, Logistics Performance, Production network, Trade, Asia and Pacific