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Regional Economies of Scale in Transportation and Regional Welfare

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Author Info
Alexandre Skiba (Department of Economics, The University of Kansas)

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Abstract

A discriminatory tariff can be welfare superior to free trade in the presence of regional economies of scale. This is because a tariff on non-regional trade concentrates trade within a region, lowering the cost of transportation, so that the gains from economies of scale can theoretically offset the losses from the tariff. To complement the theoretical point I estimate the relation between transportation cost and regional volume of trade. The estimates suggest that a 10% increase in the volume of trade brings about 2.5% reduction in transportation cost in the long run.

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File URL: http://www2.ku.edu/~kuwpaper/2007Papers/200705.pdf
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Publisher Info
Paper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 200705.

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Length: 31 pages
Date of creation: Sep 2007
Date of revision: Sep 2007
Handle: RePEc:kan:wpaper:200705

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Related research
Keywords: regional economies of scale; transportation costs; preferential trade agreements; regional welfare;

Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Hummels, David, 2001. "Time as a Trade Barrier," GTAP Working Papers 1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
  2. Mori, Tomoya & Nishikimi, Koji, 2002. "Economies of transport density and industrial agglomeration," Regional Science and Urban Economics, Elsevier, vol. 32(2), pages 167-200, March. [Downloadable!] (restricted)
  3. Jacek Cukrowski & Manfred M. Fischer, 2000. "Theory of Comparative Advantage: Do Transportation Costs Matter?," Journal of Regional Science, Blackwell Publishing, vol. 40(2), pages 311-322. [Downloadable!] (restricted)
  4. FRANÇOIS R. CASAS & E. KWAN CHOI, 1990. "Transport Innovation And Welfare Under Variable Returns To Scale," International Economic Journal, Korean International Economic Association, vol. 4(1), pages 45-57, April. [Downloadable!] (restricted)
  5. Didier Laussel & Raymond Riezman, 2006. "Fixed Transport Costs and International Trade," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Antonio Spilimbergo & Ernesto Stein, 1996. "The Welfare Implications of Trading Blocs among Countries with Different Endowments," NBER Working Papers 5472, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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