Abstract

Freight rates often differ by the direction of freight transportation. To investigate the determinants of a directional imbalance in freight rates, we show that a deviation between front- and back-haul freight rates depends on both density economies and directional imbalances in transport flows. Using panel data on truck freight transportation in Japan, we find that a 10% increase in the front-haul transport flow relative to back-haul transport flow leads to a 1.3% decrease in the front-haul freight rate relative to back-haul freight rate. This suggests that the negative effect of density economies in front-haul transport flow dominates the positive effects of both density economies in back-haul transport flow and the directional imbalance in transport flows.

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