These are Paul Krugman's two posts on shipping costs and trade.
The world is lumpy [NT Times]
In response to this Hummels quote:
Minimum efficient scale in shipping is significant. The capacity of a modern container ship is large relative to the export volumes produced by smaller countries, and there are substantial economies of scope in offering transport services over a network of ports. One way to see this effect is to calculate the number of carriers operating on a particular trade route. In the fourth quarter 2006 one in six importer-exporter pairs world-wide was served by a single direct liner “service”, meaning that only one ship was operating on that route. Over half of importer-exporter pairs were served by three or fewer ships, and in many cases all of the ships on a route were owned by a single carrier
Krugman states correctly in my view:
I know, it’s not world-shaking, but I always think it’s interesting to get a sense of the physical reality of trade, which is a lot less seamless than we tend to think.
His second post puts a little meat on the bones of the first post.
A bit more about lumps [NY Times]
I realized that my previous post didn’t explain why we were talking about shipping and all that. Our conversation concerned an empirical problem with the Eaton-Kortum model of international trade, which was the basis of the big lecture.