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Who wins, who loses? Understanding the spatially differentiated effects of the belt and road initiative

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  • Lall, Somik V.
  • Lebrand, Mathilde

Abstract

This paper examines how cities and regions within countries adjust to trade openness and improved connectivity driven by large transport investments from China’s Belt and Road Initiative. The paper presents a general equilibrium model alongside spatially detailed information on the location of people, economic activity, and transport costs in Central Asia and China. The model builds on Fajgelbaum and Redding (2018) adding restrictions on internal mobility. We use this framework to identify which places are likely to gain and which places are likely to lose. The findings are that BRI transport investments favor development in larger urban districts near trade hubs, while people in more distant regions tend to lose out. Investments in trade facilitation are complementary policies that bring large additional welfare gains and can help in spatially spreading the benefits. However, barriers to internal labor mobility are likely to exacerbate wage inequalities while dampening overall welfare.

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  • Lall, Somik V. & Lebrand, Mathilde, 2020. "Who wins, who loses? Understanding the spatially differentiated effects of the belt and road initiative," Journal of Development Economics, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:deveco:v:146:y:2020:i:c:s0304387820300717
    DOI: 10.1016/j.jdeveco.2020.102496
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    More about this item

    Keywords

    Transport corridors; Spatial general equilibrium; Territorial development; Labor mobility; Complementary policies;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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