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Transportation Costs, Increasing Returns and Regional Growth: An Interregional CGE Analysis

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  • Eduardo Haddad

    ()

  • Geoffrey Hewings

    ()

Abstract

The purpose of this paper was threefold. First, we presented a flexible analytical framework, based on sound and consistent economic theory and data, in order to assess the likely state/sectoral/income effects of policy changes in Brazil. This is the first fully operational interstate CGE model implemented for the Brazilian economy, based on previous work by the author and associates. Among the features embedded in this framework, modeling of scale economies and transportation costs provides an innovative way of dealing explicitly with theoretical issues related to integrated regional systems. Results seemed to reinforce the need to better specifying spatial interactions in interregional CGE models. Second, in order to illustrate the analytical capability of the CGE module, we presented a simulation, which evaluated the regional impacts of a decrease in transportation costs, in accordance with recent policy developments in Brazil. Rather than providing a critical evaluation of this debate, we intended to emphasize the likely structural impacts of such policies. Third, previous diagnostics suggested the need to make a more in-depth analysis of trade flows between the Brazilian states, potentially leading to generalizations regarding the type of trade involved, changes in its composition through time as the Brazilian economy develops, and the implications of these structural differences in the coordination and implementation of development policies. In order to address this issue we gave interregional trade its proper place by taking into account a fully specified interstate system of accounts specially developed for the purpose of calibrating the CGE model.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p461.

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Date of creation: Aug 2004
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Handle: RePEc:wiw:wiwrsa:ersa04p461

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  1. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411, October.
  2. Matthew W. Peter & Mark Horridge & G.A.Meagher & Fazana Naqvi & B.R.Parmenter, 1996. "The Theoretical Structure of MONASH-MRF," Centre of Policy Studies/IMPACT Centre Working Papers op-85, Victoria University, Centre of Policy Studies/IMPACT Centre.
  3. Domingues, Edson P. & Haddad, Eduardo A. & Hewings, Geoffrey, 2008. "Sensitivity analysis in applied general equilibrium models: An empirical assessment for MERCOSUR free trade areas agreements," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 287-306, May.
  4. Peter B. Dixon & Maureen T. Rimmer, 1998. "Forecasting and Policy Analysis with a Dynamic CGE Model of Australia," Centre of Policy Studies/IMPACT Centre Working Papers op-90, Victoria University, Centre of Policy Studies/IMPACT Centre.
  5. Jacek Cukrowski & Manfred M. Fischer, 2000. "Theory of Comparative Advantage: Do Transportation Costs Matter?," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 311-322.
  6. DeVuyst, Eric A. & Preckel, Paul V., 1997. "Sensitivity analysis revisited: A quadrature-based approach," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 175-185, April.
  7. Lars Peter Hansen & James J. Heckman, 1996. "The Empirical Foundations of Calibration," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 87-104, Winter.
  8. Kashif S. Mansori, 2003. "The Geographic Effects of Trade Liberalization with Increasing Returns in Transportation," Journal of Regional Science, Wiley Blackwell, vol. 43(2), pages 249-268.
  9. W. Jill Harrison & K.R. Pearson, 1994. "Multiregional and Intertemporal AGE Modelling via GEMPACK," Centre of Policy Studies/IMPACT Centre Working Papers ip-66, Victoria University, Centre of Policy Studies/IMPACT Centre.
  10. Schmutzler, Armin, 1999. " The New Economic Geography," Journal of Economic Surveys, Wiley Blackwell, vol. 13(4), pages 355-79, September.
  11. McKitrick, Ross R., 1998. "The econometric critique of computable general equilibrium modeling: the role of functional forms," Economic Modelling, Elsevier, vol. 15(4), pages 543-573, October.
  12. Arndt, Channing, 1996. "An Introduction to Systematic Sensitivity Analysis via Gaussian Quadrature," GTAP Technical Papers 305, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  13. repec:fth:guelph:1 is not listed on IDEAS
  14. 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.
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Cited by:
  1. Rodriguez, U-Primo E., 2007. "State-of-the-Art in Regional Computable General Equilibrium Modelling with a Case Study of the Philippines," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 20(1).
  2. Eduardo Amaral Haddad & Edson Paulo Domingues, 2003. "Interstate Trade and Regional Development: an (Integrated) Interregional CGE Approach," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] e32, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

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