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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

  • Kristian Behrens

    ()
    (CORE, Université Catholique de Louvain e LEG, Université de Bourgogne)

  • Andrea R. Lamorgese

    ()
    (Banca d'Italia and Ente Luigi Einaudi)

  • Gianmarco I.P. Ottaviano

    ()
    (Università di Bologna, FEEM e CEPR)

  • Takatoshi Tabuchi

    ()
    (Faculty of Economics, University of Tokyo)

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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File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td07/td628_07/td628/en_tema_628.pdf
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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 628.

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Date of creation: Apr 2007
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Handle: RePEc:bdi:wptemi:td_628_07

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Related research

Keywords: trade frictions; multi-country trade models; monopolistic competition; spatial networks; international integration;

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References

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  1. Coralio Ballester & Antoni Calvo-Armengol & Yves Zenou, 2005. "Who's Who in Networks. Wanted: the Key Player," NajEcon Working Paper Reviews 666156000000000586, www.najecon.org.
  2. 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.
  3. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  4. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  5. Head, Charles Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers.
  6. 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.
  7. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  8. 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.
  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.
  10. 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.
  11. 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).
  12. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  13. repec:fth:iniesr:430 is not listed on IDEAS
  14. 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).
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Citations

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Cited by:
  1. 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).
  2. Michele Fratianni & Francesco Marchionne, 2011. "Trade Costs and Economic Development," Mo.Fi.R. Working Papers 54, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  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. Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2009. "Beyond the home market effect: Market size and specialization in a multi-country world," Journal of International Economics, Elsevier, vol. 79(2), pages 259-265, November.
  5. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 696-713, November.
  6. Carl Gaigné & Jacques-François Thisse, 2013. "New economic geography and the city," Working Papers 188884, Institut National de la Recherche Agronomique, France.
  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. Pamela Bombarda, 2013. "Firm Heterogeneity and the Localization of Economic Activities," THEMA Working Papers 2013-25, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  9. Kaitila, Ville, 2013. "Specialisation and/or Convergence: Structure of European Exports and Production," ETLA Working Papers 12, The Research Institute of the Finnish Economy.
  10. 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.
  11. BEHRENS, Kristian & THISSE, Jacques-François, . "Regional economics: a new economic geography perspective," CORE Discussion Papers RP -1946, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. 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.
  13. Juan Labraga, 2009. "Política Comercial y Política de Infraestructura en el MERCOSUR," IDB Publications 9328, Inter-American Development Bank.

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