The influence of infrastructure on regional wheat trade in Russia: A gravity model approach

We investigate the determinants of Russian regional wheat flows focusing on the role played by transport costs and regional infrastructure. We adapt the Anderson & van Wincoop (2003) gravity model to regional trade by considering a regional border effect and by assuming that trade costs are also determined by infrastructure variables. Our model identifies positive effects of the number and the average loading capacity of grain rail terminals in the region. This analysis reveals substantial effects of infrastructure on interregional wheat trade in Russia. Especially, the quality of infrastructure seems to have a strong effect, suggesting that improvements of infrastructure should focus on the improvements of the quality rather than the quantity of infrastructure.