An empirical analysis of the economic impact of major ports on cities, South Korea

TLDR: In this paper, the authors investigated the impact of functional integration and port regionalization on the economic impact of the ports on the regional economy and showed that the economic impacts of individual ports are quite different according to the size of port traffic, the cargo composition and the spatial boundary of the users.

Abstract: The changes in port-related activities have been successfully recognised by the key words in recent port studies such as a ‘node’ of a transport network, an ‘integrated component’ in a transport service, and a ‘central place’ in global logistics. Especially, the spatial enlargement of the ports to their hinterlands is generally agreed to occur in practice by connecting discrete port activities with global supply chains. These connections result in various changes in different aspects such as economic impacts, the port community, port governance etc. Port impact studies (PISs) have contributed to understanding the economic impacts of ports both at the national level and at the regional level. However, the PISs have been depending mainly on Input Output (IO) analysis and hence the PISs have methodological constraints that limit the evaluation of the economic impacts of the intensification of functional integration and port regionalisation. To fill the research gap, this study implements an empirical analysis by following three different steps. Firstly, at the level of a port, this study scrutinises the development path, the interaction with the city and the status in the national port system by applying various qualitative and quantitative methods. Secondly, at the level of a sector in a regional economy, the gross value-added (GVA) per worker of transportation and the four sub-sectors (air, land, water and supporting activities) in transportation are examined by applying the shift-share analysis which has a powerful advantage to partitioning all changes to several effects from regional economy and national one in the relationship between both of them. Lastly, at the level of a regional economy, this study estimates the contributions of the ports to the regional economies by applying an econometric analysis that builds on previous studies. In conclusion, this study suggests the significant implication that the intensification of functional integration and port regionalisation is likely to enlarge the disparity between the port cities in the sight of the impacts of the ports on its regional economies. This implication is supported mainly by the two different approaches. On one hand, this study shows that individual port cities have quite different transportation sectors in terms of the GVA per worker and the sectoral proportion of transportation in the regional economies by applying the shift-share analysis. In particular, the ports of Busan and Incheon, where containerized freight makes up a high proportion of traffic, make a greater contribution to their regional economies. The originality of this thesis rests in showing if the suggestions in the port studies take place in practice by applying the shift-share analysis and if this methodology is useful in examining the structural changes of four sub-sectors in transportation for the first time. On the other hand, this study implies that the economic impact of individual ports is quite different according to the size of port traffic, the cargo composition and the spatial boundary of the users etc. by applying the econometric analyses, including the sub-group analysis, by region. It implies that significant bias in the PISs can result from the incorrect application of the methodologies such as the IO analysis of using the national IO tables and the econometric analysis of estimating a coefficient for the whole country.