This paper studies the consequences of a U.S. cabotage law for Puerto Rico (PR). Data on ship arrivals in PR show that the fleet of U.S. vessels that call there lacks capacity for carrying non-containerized freight. Empirical estimation using trade data shows that PR's imports of sea-shipped final products are biased against U.S. mainland sources. This bias is strongest for heavy products and products not typically shipped in containers. Among upstream products, a strong bias against imports of sea-shipped products applies to all sources. Estimated tariff-equivalent costs among final products imply static annual welfare losses of 1.1 percent of household consumption ($203 per person). The same tariff-equivalent cost estimates imply that the law raises the cost of investment in PR by 3.0 percent. The observed bias against sea-shipped inputs in PR's imports may result from long-run industry location decisions that have been influenced by the law's presence.
Authors
- DOI
- https://dx.doi.org/10.1596/1813-9450-10780
- Disclosure Date
- 2024/05/21
- Disclosure Status
- Disclosed
- Doc Name
- Economic Consequences of Cabotage Restrictions : The Effect of the Jones Act on Puerto Rico
- Originating Unit
- Off of Sr VP Dev Econ/Chief Econ (DECVP)
- Published in
- United States of America
- Series Name
- Policy Research working paper ; no. WPS 10780; PROSPERITY;
- Unit Owning
- DECRG: Trade & Intl. Integration (DECTI)
- Version Type
- Final
- Volume No
- 1