A linear model to estimate modal split in international freight transport, based on revealed preferences about cost and time saving

We present a new model for estimating the distribution of international freight transport over transport modes that is directly applicable to aggregated data, allows estimations and predictions also when some modes are infeasible on some routes, and requires few processing time and memory space. It builds on the assumption that demand for transport by a given mode is driven by trading firms' and consumers' preferences about saving transport costs and time. In contrast to conventional mode-choice models, it is linear and grounded on consumer demand theory. Applying the model to international freight transport as recorded in the latest upgrade of UN Comtrade reveals an average cost elasticity of transport demand of - 0.32 and an average time elasticity of - 0.18. In addition, we find significant independent mode-specific effects. Cost and time elasticities are highly dependent on the type of commodity transported. The cost elasticity ranges from zero to - 1.9 and the time elasticity from zero to - 3.3 across commodity groups defined at the four-digit level of the Harmonized System classification. These findings suggest that policy measures, exogenous shocks or other events that change the relative transport costs and transit times across modes can cause modal shifts-for some commodities more than for others-thereby mitigating the loss in welfare.