Regional Agreements and Welfare in the South: When Scale Economies in Transport Matter
AbstractThis paper focuses on two issues that challenge the accepted pessimistic view that regional trade agreements (RTAs) between developing countries in welfare terms by taking into account scale economies in transport. First, how is the standard welfare analysis of an RTA affected by the endogeneity of transport costs (i.e. by the joint determination of trade quantities and transport costs)? Second, what are the long-run consequences of endogenous transport costs for welfare if worldwide free trade is achieved through RTAs? A standard model of inter and intra-industry trade is augmented by a “hub-and-spoke” transport network structure, where the standard “iceberg” transport cost model is contrasted with one in which transport costs depend on the distance between trade partners, the volume of trade, and the level of development. Under a plausible parameterization for scale economies in transport, regional liberalization will have persistent effect on trade flows through an irreversible effect on regional transport costs that improves welfare. Free trade achieved under an RTA leads to permanently higher welfare than under multilateral liberalization.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CERDI in its series Working Papers with number 200726.
Date of creation: 2007
Date of revision:
regional integration; Welfare; Transport Costs; Economies of Scale; developing countries;
Other versions of this item:
- C�line CARRERE, 2005. "Regional Agreements and Welfare in the South:When Scale Economies in Transport Matter," Working Papers 200513, CERDI.
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.:
- Busse, Matthias, 2003. "Tariffs, Transport Costs and the WTO Doha Round: The Case of Developing Countries," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 4(1).
- Jeffrey A. Frankel & Ernesto Stein & Shang-Jin Wei, 1996.
"Regional Trading Arrangement: Natural or Super-Natural?,"
NBER Working Papers
5431, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements: Natural or Supernatural," American Economic Review, American Economic Association, vol. 86(2), pages 52-56, May.
- Jeffrey A. Frankel, Ernesto Stein, and Shang-Jin Wei., 1996. "Regional Trading Arrangements: Natural or Super-Natural?," Center for International and Development Economics Research (CIDER) Working Papers C96-059, University of California at Berkeley.
- Paul Krugman, 1991.
"The move toward free trade zones,"
Federal Reserve Bank of Kansas City, pages 7-58.
- Simeon Djankov & Caroline Freund & Cong S. Pham, 2010.
"Trading on Time,"
The Review of Economics and Statistics,
MIT Press, vol. 92(1), pages 166-173, February.
- 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, June.
- James E. Anderson & Eric van Wincoop, 2004.
Boston College Working Papers in Economics
593, Boston College Department of Economics.
- Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2001.
"Trade in international maritime services : how much does policy matter?,"
Policy Research Working Paper Series
2522, The World Bank.
- Carsten Fink & Aaditya Mattoo & Ileana Cristina Neagu, 2002. "Trade in International Maritime Services: How Much Does Policy Matter?," World Bank Economic Review, World Bank Group, vol. 16(1), pages 81-108, June.
- Paul Collier & Jan Willem Gunning, 1998.
"Explaining African economic performance,"
Economics Series Working Papers
WPS/1997-02.2, University of Oxford, Department of Economics.
- Dollar, David & Micco, Alejandro & Clark, Ximena, 2002. "Maritime transport costs and port efficiency," Policy Research Working Paper Series 2781, The World Bank.
- Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
- Caroline Freund, 2000. "Different Paths To Free Trade: The Gains From Regionalism," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1317-1341, November.
- Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
- Frankel, Jeffrey A. & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements," Center for International and Development Economics Research, Working Paper Series qt5hf1z4rv, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- David Hummels & Georg Schaur, 2012.
"Time as a Trade Barrier,"
NBER Working Papers
17758, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vincent Mazenod).
If references are entirely missing, you can add them using this form.