Analysis on the Effects of Logistics Efficiency on Korea’s Trade Flows in RCEP Signatories

Analysis on the Effects of Logistics Efficiency on Korea’s Trade Flows in RCEP Signatories

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Purpose - The purpose of this study is to analyze the effect of logistics efficiency in RCEP signatory countries on Korea’s trade. In particular, after analyzing the effects of individual indicators of the logistics performance index (LPI) on trade, policy implications are drawn based on the results. Design/Methodology/Approach - In order to analyze the effect of logistics efficiency in RCEP countries on Korea’s trade, the independent variables of the gravity model included GDP, population, distance, and LPI. For detailed analysis, in addition to the LPI, the individual indicators of LPI are input to the independent variable for analysis. This study adopts varying coefficient models, the random effects model and fixed effects model, in order to more effectively analyze unobservable factors in the panel data. Findings - The empirical evidence using the gravity model showed that the coefficient of LPI was about 1.7 and statistically significant at the 1% level of significance. In other words, if the logistics efficiency of the RCEP signatory country increases by 1%, when other variables are constant, Korea’s trade volume increases by about 1.7%. As a result of analyzing the effect of LPI’s individual indicators on trade, it was found that the five individual indicators of logistics infrastructure, international shipment, logistics service, timeliness, and goods tracking affect trade. On the other hand, the clearance index was not statistically significant at any significance level. Research Implications - It was confirmed that the logistics efficiency of RCEP signatory countries is important for Korea’s trade facilitation. In other words, if not only Korea’s logistics efficiency but also the logistics efficiency of the RCEP signatory countries are improved, the facilitation of trade between the two countries can be achieved. To this end, it is necessary to reduce the logistics cost through the establishment of the logistics infrastructure, and it is also necessary to make efforts to increase logistics efficiency.