How (in)elastic is the demand for short-sea shipping? A review of elasticities and application of different models to Swedish freight flows

Abstract

Despite high ambitions, policies for a modal shift in Europe have largely been unsuccessful. Part of the explanation relates to the inelasticity of freight transport demand. Understanding the demand elasticity of freight transport is important to design and appraise policies for external cost reductions in the transport sector. There have been many studies focused on estimating the elasticity of demand for short-sea shipping, a mode which policy makers have often aimed to strengthen to facilitate a modal shift from road freight. The objective of this review is to build upon the available literature by presenting and comparing estimated elasticities and to demonstrate the state of evidence through the application of two methodological approaches. Our review shows that there is a surprising degree of variation in elasticity estimates, part of which can likely be explained by differing methodological approaches. Applying a deterministic cost-minimising freight transport model and a stochastic multinomial logit approach based on responses from the Swedish Cargo Flow Survey, we demonstrate the inelasticity of Swedish maritime freight flows and provide suggestions for future research and policy discussions. For future studies of maritime transport demand elasticities to arrive at reliable and policy-relevant results, we highlight the need for combined and pluralistic methodological approaches and an increased use of real-world data.