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Changes in Infrastructure and Tariff Barriers: Local Vs. Global Impacts

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  • Behrens, Kristian
  • Lamorgese, Andrea
  • Ottaviano, Gianmarco Ireo Paolo
  • Tabuchi, Takatoshi

Abstract

We develop a multi-country Dixit-Stiglitz model to investigate the impacts of: (i) changes in the international distribution of consumers' expenditure; (ii) decreasing tariffs; and (iii) improvements in transportation infrastructure. We show that, in general, decreasing tariff barriers do not allow for any clear predictions regarding changes in industry location and welfare, whereas this is possible with respect to improvements in transportation infrastructure. In particular, infrastructural improvements have spatially limited impacts when the transportation network is locally described by a tree. Any decrease in transport costs is Pareto welfare enhancing in this case.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5103.

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Date of creation: Jun 2005
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Handle: RePEc:cpr:ceprdp:5103

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Related research

Keywords: home market effect; imperfect competition; international integration; multi-country trade models; transportation networks;

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References

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  1. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
  2. Behrens, Kristian & Gaigne, Carl & Ottaviano, Gianmarco I.P. & Thisse, Jacques-Francois, 2007. "Countries, regions and trade: On the welfare impacts of economic integration," European Economic Review, Elsevier, vol. 51(5), pages 1277-1301, July.
  3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  4. Jens Südekum, 2005. "The Home Market Shadow," Working Papers of the Research Group Heterogenous Labor 05-01, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.
  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. 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.
  7. Behrens, Kristian & Lamorgese, Andrea & Ottaviano, Gianmarco Ireo Paolo & Tabuchi, Takatoshi, 2004. "Testing the Home Market Effect in a Multi-Country World: The Theory," CEPR Discussion Papers 4468, C.E.P.R. Discussion Papers.
  8. 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.
  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. 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.
  11. 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.
  12. 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.
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Cited by:
  1. Fr�d�ric Robert-Nicoud, 2006. "Agglomeration and Trade with Input–Output Linkages and Capital Mobility," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(1), pages 101-126.
  2. Andrea R. Lamorgese, 2008. "Innovation driven sectoral shocks and aggregate city cycles," Temi di discussione (Economic working papers) 667, Bank of Italy, Economic Research and International Relations Area.
  3. J. Suedekum, 2007. "Identifying the dynamic home market effect in a three-country model," Journal of Economics, Springer, vol. 92(3), pages 209-228, December.

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