Importance of the logistics performance index in international trade

Abstract

Logistics and transport increasingly play a pivotal role in international trade relations. The Logistics Performance Index (LPI) analyses differences between countries in terms of customs procedures, logistics costs and the quality of the infrastructure for overland and maritime transport. The aim of this article is to analyse the impact that each of these components has on trade in emerging economies using a gravity model. Furthermore, the study also attempts to detect possible advances in logistics in developing countries, which are grouped into five regions (Africa, South America, Far East, Middle East and Eastern Europe) by comparing the first LPI data published in 2007 with the most recent data, released in 2012. The results obtained reveal that improvements in any of the components of the LPI can lead to significant growth in a country’s trade flows. Specifically, LPI components are becoming increasingly important for international trade in many countries in Africa, South America and Eastern Europe.