Time to Build and Fluctuations in Bulk Shipping

This paper studies fluctuations in the global bulk shipping industry by analyzing the effects of construction lags and demand uncertainty on ship investment and pricing dynamics. Kalouptsidi develops a dynamic model of ship entry and exit that incorporates time-to-build delays and the tendency for construction periods to lengthen during investment booms. Using a rich dataset of secondhand ship sales, the paper introduces a novel estimation strategy in which resale prices provide direct information about firms’ value functions. The results show that reducing or eliminating time-to-build constraints lowers shipping prices while substantially increasing both the level and volatility of investment activity.