Industrial Location and Public Infrastructure
AbstractThis paper examines the impact of public infrastructure on industrial location when increasing returns are present. Poor infrastructure implies costs of Samuelson's `iceberg' form and alter trade both within and between countries. Trade integration implies that firms tend to locate in countries with better infrastructure so that regional policies that affect the level of public infrastructure influence economic geography. The effectiveness of such policies decreases when infrastructure improves, however, because a high level of infrastructure and strong economies of scale magnify the concentration effects of differentials in infrastructure, market size and capital-labour ratios. Infrastructure policies that facilitate intra-regional trade in the poor country lead to regional convergence but policies that facilitate intra-regional trade lead to regional divergence. We also analyse the incentives for countries to inhibit industrial relocation.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 909.
Date of creation: Feb 1994
Date of revision:
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Other versions of this item:
- F1 - International Economics - - Trade
- H4 - Public Economics - - Publicly Provided Goods
- R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
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