Former Fellow
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The Jones Act requires that all goods transported between US ports use ships carrying the US flag. In addition, the ships must be constructed in the United States and owned and crewed by US citizens and permanent residents. Despite the importance of the Jones Act, there is little in the economics literature devoted to a rigorous econometric evaluation of the costs and benefits that it generates. We study the welfare effects of the Jones Act in the market of petroleum product tankers. We estimate supply and demand functions in this market, then use the estimates to compute consumer, producer, and total surplus in the presence and in the hypothetical absence of the Jones Act. We find the economic welfare costs of the Jones Act in this segment amount to $759.1 million per year. While substantial, it may not be large enough to incent policy change because strong lobby efforts for small, well-organized groups that have much to lose can be effective in preserving status quo when costs are diffuse across a large population.
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