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

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

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

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References

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  1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  2. 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.
  3. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2004. "Who's Who in Networks. Wanted: The Key Player," Working Papers 178, Barcelona Graduate School of Economics.
  4. 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.
  5. 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.
  6. repec:fth:iniesr:430 is not listed on IDEAS
  7. BEHRENS, Kristian & GAIGNE, Carl & OTTAVIANO, Gianmarco I.P. & THISSE, Jacques-François, . "Countries, regions and trade: on the welfare impacts of economic integration," CORE Discussion Papers RP -1936, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Keith Head & Thierry Mayer, 2004. "The Empirics of Agglomeration and Trade," Sciences Po publications info:hdl:2441/10191, Sciences Po.
  9. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  10. 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.
  11. BEHRENS, Kristian & LAMORGESE, Andrea R. & OTTAVIANO, Gianmarco I.P. & TABUCHI, Takatoshi, 2005. "Testing the ‘home market effect’ in a multi-country world," CORE Discussion Papers 2005055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. 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.
  13. 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.
  14. 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.
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Citations

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Cited by:
  1. Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Clark University, vol. 88(2), pages 137-163, 04.
  2. Behrens, Kristian & Thisse, Jacques-Francois, 2007. "Regional economics: A new economic geography perspective," Regional Science and Urban Economics, Elsevier, vol. 37(4), pages 457-465, July.
  3. Arne Melchior, 2009. "East-West Integration and the Economic Geography of Europe," CASE Network Studies and Analyses 0379, CASE-Center for Social and Economic Research.
  4. Pamela Bombarda, 2013. "Firm Heterogeneity and the Localization of Economic Activities," Working Papers hal-00877201, HAL.
  5. Carl Gaigné & Jacques-François Thisse, 2013. "New economic geography and the city," Working Papers 188884, Institut National de la Recherche Agronomique, France.
  6. Pascal Mossay & Takatoshi Tabuchi, 2011. "A Note on the Decomposition Technique of Economic Indices," CIRJE F-Series CIRJE-F-811, CIRJE, Faculty of Economics, University of Tokyo.
  7. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2007. "Adding Geography to the New Economic Geography," CESifo Working Paper Series 2038, CESifo Group Munich.
  8. Takatoshi Tabuchi, 2012. "Are NEG Models Capable of Simulating Agglomeration in the Real World?," CIRJE F-Series CIRJE-F-854, CIRJE, Faculty of Economics, University of Tokyo.
  9. Oyama, Daisuke, 2006. "Agglomeration under Forward-Looking Expectations: Potentials and Global Stability," MPRA Paper 15239, University Library of Munich, Germany.
  10. Kaitila, Ville, 2013. "Specialisation and/or Convergence: Structure of European Exports and Production," ETLA Working Papers 12, The Research Institute of the Finnish Economy.
  11. Kristian Behrens & Andrea R. Lamorgese & Gianmarco I.P. Ottaviano & Takatoshi Tabuchi, 2009. "Beyond the Home Market Effect: Market Size and Specialization in a Multi-Country World," KITeS Working Papers 023, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2009.
  12. MOSSAY, Pascal & TABUCHI, Takatoshi, 2012. "Preferential trade agreements harm third countries," CORE Discussion Papers 2012035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Juan Labraga, 2009. "Política Comercial y Política de Infraestructura en el MERCOSUR," IDB Publications 9328, Inter-American Development Bank.

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