Source: World Bank for GDP data. Various sources for logistics costs.
Logistics Costs and Economic Development
There is a relationship between the level of economic development (as measured in terms of GDP per capita), the composition of a national economy and logistics costs. While logistics costs can amount to 25% of delivered costs in some developing economies, they can go as low as 8 to 9% in advanced economies. Many factors can influence this cost structure:
  • Transportation infrastructures. Influences transport costs, capacity and reliability. Extensive transport infrastructures are linked with lower logistics costs.
  • Role of economic sectors. Economies relying on the primary (e.g. agriculture and mining) and secondary (manufacturing) sectors have higher logistics costs than economies relying on the tertiary (services) sector.
  • Interest rates. Mostly impact transactional and inventory carrying costs. Higher interest rates
  • Level of competition. Monopolistic and oligopolistic markets (e.g. state owned enterprises) tend to have higher logistics costs as stakeholders have less incentives to innovate and use infrastructure (e.g. ports) from a rent seeking perspective.
  • Telecommunication infrastructures. Reduce transactional and inventory management costs.
  • Legal system. Enforcement of contracts and protection of private property (e.g. terminals, warehouses).
  • Regulations and taxation. The level of constraints the transport sector is subject to, such as environmental regulations, as well as its taxation level.
There is a 'logistics costs funnel' that implies a convergence as the economy develops towards lower logistics costs. Low levels of economic development are associated with a high variation of logistics costs among countries, while this share narrows at higher levels of economic development. This is mainly attributable to a diversity of infrastructure conditions as well as different roles assumed by the primary and secondary sectors. Australia, in spite of a high GDP per capita, has a higher share of logistics costs than comparable countries because of the importance of mining in the economy.