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Spatial aspects of trade liberalization in Colombia: A general equilibrium approach

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Abstract

This paper offers some preliminary steps in the marriage of some of the theoretical foundations of new economic geography with spatial computable general equilibrium models. Modelling the spatial economy of Colombia using the traditional assumptions of computable general equilibrium (CGE) models makes little sense when one territorial unit, Bogotá, accounts for over one quarter of GDP and where transportation costs are high and accessibility low compared to European or North American standards. Hence, handling market imperfections becomes imperative as does the need to address internal spatial issues from the perspective of Colombia's increasing involvement with external markets. The paper builds on the Centro de Estudios de Economia Regional (CEER) model, a spatial CGE model of the Colombian economy; non‐constant returns and non‐iceberg transportation costs are introduced and some simulation exercises carried out. The results confirm the asymmetric impacts that trade liberalization has on a spatial economy in which one region, Bogotá, is able to more fully exploit scale economies vis‐à‐vis the rest of Colombia. The analysis also reveals the importance of different hypotheses on factor mobility and the role of price effects to better understand the consequences of trade opening in a developing economy. Resumen Este artículo ofrece algunos avances preliminares en la fusión de algunas de las bases teóricas de la nueva geografía económica con modelos espaciales de equilibrio general computable. La modelización de la economía espacial de Colombia por medio de los supuestos tradicionales de los modelos de equilibrio general computable (EGC) tiene poco sentido cuando una unidad territorial, Bogotá, representa más de una cuarta parte del PIB y donde los costos de transporte son elevados y la accesibilidad baja en comparación con estándares europeos o norteamericanos. Por tanto, el manejar las imperfecciones del mercado se convierte en algo imperativo así como la necesidad de tratar con temas espaciales internos desde la perspectiva del involucramiento cada vez mayor de Colombia con mercados externos. El artículo se fundamenta en el modelo del Centro de Estudios de Economía Regional (CEER), un modelo espacial de EGC de la economía colombiana; se introducen retornos no constantes y costos de transporte no de tipo iceberg (ocultos, Samuelson) y se realizan algunos ejercicios de simulación. Los resultados confirman los impactos asimétricos que la liberalización del comercio tiene en una economía espacial en la que una región, Bogotá, es capaz de explotar más intensamente las economías de escala en comparación con el resto de Colombia. El análisis revela también la importancia de las diferentes hipótesis en el factor movilidad y el rol de efectos de precios para entender mejor las consecuencias de la apertura al comercio en una economía en desarrollo.

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  • E.A. Haddad & J. Bonet & G.J.D. Hewings & F.S. Perobelli, 2009. "Spatial aspects of trade liberalization in Colombia: A general equilibrium approach," Papers in Regional Science, Wiley Blackwell, vol. 88(4), pages 699-732, November.
  • Handle: RePEc:bla:presci:v:88:y:2009:i:4:p:699-732
    DOI: 10.1111/j.1435-5957.2009.00268.x
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    1. Haddad, Eduardo & Porsse, Alexandre & Pereda, Paula, 2012. "Territorial Economic Impacts of Climate Anomalies in Brazil," TD NEREUS 8-2012, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    2. Arguello, Ricardo, 2009. "The Regional Impact of Discriminatory Trade Liberalization on Colombian Agriculture," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 39(2), pages 1-19.
    3. Eduardo Haddad & Inácio F. Araújo, 2020. "The Internal Geography of Services Value-Added in Exports: A Latin American Perspective," Research papers & Policy papers 1925, Policy Center for the New South.
    4. Eduardo A. Haddad & Luis A. Galvis & Inácio F. Araújo-Junior & Vinicius A.Vale, 2018. "Impact Assessment of Scenarios of Interregional Transfers in Colombia," Documentos de Trabajo Sobre Economía Regional y Urbana 016767, Banco de la República - Economía Regional.
    5. Eduardo A. Haddad & Jesús P. Mena-Chalco, Otavio J. G. Sidone, 2015. "Scholarly Collaboration in Regional Science in Developing Countries: The Case of the Brazilian REAL Network," Working Papers, Department of Economics 2015_12, University of São Paulo (FEA-USP).
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    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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