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Changes in transport and non-transport costs: Local vs global impacts in a spatial network

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Author Info
Behrens, Kristian
Lamorgese, Andrea R.
Ottaviano, Gianmarco I.P.
Tabuchi, Takatoshi

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Abstract

We develop a multi-country Dixit-Stiglitz trade model and analyze how industry location and welfare respond to changes in: (i) transport frictions (e.g., infrastructure, transportation technology); and (ii) non-transport frictions (e.g., tariffs, standards and regulations). We show that changes in non-transport frictions, which are usually origin-destination specific, do not allow for any clear prediction as to changes in industry location and welfare; whereas changes in transport frictions, which are usually not origin-destination specific, may allow for such predictions. In particular, we show that reductions in transport frictions occurring at links around which the spatial network is locally a tree are Pareto welfare improving.

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Publisher Info
Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 37 (2007)
Issue (Month): 6 (November)
Pages: 625-648
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Handle: RePEc:eee:regeco:v:37:y:2007:i:6:p:625-648

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Related research
Keywords: Trade frictions Multi-country trade models Monopolistic competition Spatial networks International integration;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December. [Downloadable!] (restricted)
  2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November. [Downloadable!] (restricted)
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  4. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier. [Downloadable!] (restricted)
  5. Cassing, James H, 1978. "Transport Costs in International Trade Theory: A Comparison with the Analysis of Nontraded Goods," The Quarterly Journal of Economics, MIT Press, vol. 92(4), pages 535-50, November. [Downloadable!] (restricted)
  6. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March. [Downloadable!]
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  7. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669 Elsevier. [Downloadable!] (restricted)
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  8. Falvey, Rodney E, 1976. "Transport Costs in the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 86(343), pages 536-50, September. [Downloadable!] (restricted)
  9. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February. [Downloadable!] (restricted)
  10. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2006. "Who's Who in Networks. Wanted: The Key Player," Econometrica, Econometric Society, vol. 74(5), pages 1403-1417, 09. [Downloadable!] (restricted)
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  11. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  12. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
  13. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
  14. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2007. "Adding Geography to the New Economic Geography," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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