Global Shrinkage of Space and the Hub-and-Spoke System in the Global Trade Network

Abstract

We explore how the hub-and-spoke system in the international freight transportation network contributes to the global shrinkage of space. The friction in long-distance trade routes varies by the location of shippers and nodal characteristics of traversed ports, and is mitigated by the quality of scale economies driven by the hub-and-spoke distribution system along the trajectory of the logistic process. In order to confirm the shrinkage of space brought about by the hub-and-spoke shipping economies through transshipment routes via hub ports, we examine disaggregated cross-Atlantic cargo shipping trajectory data from Europe to the U.S. recorded both on landside and seaside with a discrete choice model. The results present that hub-and-spoke shipping economies arise with the scales of landside and maritime port operations and with shipping line diversity. Generally, they are found to offset distance friction that occurs along landside and maritime shipping voyages, but hub-and-spoke shipping economies arise differently depending on how hub-and-spoke configurations are set. They mainly stem from larger scale of ports’ operation and more diverse shipping lines serving the final port of export. The hub-and-spoke system is confirmed as a main driver of global shrinkage of space in terms of long-distance commercial activities.