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Spatial price equilibrium and the transport sector : a trade-consistent SCGE model

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  • Ando, Asao
  • Meng, Bo
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    Abstract

    This paper presents a framework for an SCGE model that is compatible with the Armington assumption and explicitly considers transport activities. In the model, the trade coefficient takes the form of a potential function,and the equilibrium market price becomes similar to the price index of varietal goods in the context of new economic geography (NEG). The features of the model are investigated by using the minimal setting, which comprises two non-transport sectors and three regions. Because transport costs are given exogenously to facilitate study of their impacts, commodity prices are also determined relative to them. The model can be described as a system of homogeneous equations, where an output in one region can arbitrarily be determined similarly as a price in the Walrasian equilibrium. The model closure is sensitive to formulation consistency so that homogeneity of the system would be lost by use of an alternative form of trade coefficients.

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    File URL: http://ir.ide.go.jp/dspace/bitstream/2344/1301/1/ARRIDE_Discussion_No.447_ando.pdf
    File Function: First version, 2014
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    Bibliographic Info

    Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 447.

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    Date of creation: Feb 2014
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    Publication status: Published in IDE Discussion Paper. No. 447. 2014.2
    Handle: RePEc:jet:dpaper:dpaper447

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    Related research

    Keywords: Econometric model; Economic geography; Transportation; Trade theory; SCGE (Spatial Computable General Equilibrium) model; Armington assumption; Transport sector;

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    References

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    1. Meng, Bo & Ando, Asao, 2005. "An Economic Derivation on Trade Coefficients under the Framework of Multi-regional I-O Analysis," IDE Discussion Papers 29, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    2. Asao Ando & Bo Meng, 2009. "The Transport Sector And Regional Price Differentials: A Spatial Cge Model For Chinese Provinces," Economic Systems Research, Taylor & Francis Journals, vol. 21(2), pages 89-113.
    3. Philip McCann, 2005. "Transport costs and new economic geography," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 305-318, June.
    4. Lofgren, Hans & Robinson, Sheman, 2002. "Spatial-network, general-equilibrium model with a stylized application," Regional Science and Urban Economics, Elsevier, vol. 32(5), pages 651-671, September.
    5. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
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