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

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

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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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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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Find related papers by JEL classification:
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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  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)
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  3. 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. [Downloadable!] (restricted)
  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!] (restricted)
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  7. 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)
  8. 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)
  9. Suedekum, Jens, 2005. "The Home Market Shadow," IZA Discussion Papers 1462, Institute for the Study of Labor (IZA). [Downloadable!]
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  10. Behrens, Kristian & Lamorgese, Andrea & Ottaviano, Gianmarco I P & 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. [Downloadable!] (restricted)
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  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. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September. [Downloadable!] (restricted)
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