Analyzing spillover effects of development of Asian highway on regional growth of Northeast Asian countries

We develop a multinational multiregional computable general equilibrium (MMCGE) model to analyze the economic impacts of connecting two missing links on Asian Highway Route 1 (AH1) in 20 Northeast Asian regions. The major sources of economic benefits from the completion of two cross‐border transportation networks connecting Japan and China via the Korean peninsula are travel time (cost) reductions and decreased transportation rate. These variables are major shocks to the model, which identifies wider economic benefits through the supply and demand linkages among economic agents in these nations. In terms of the spillover effects on the 20 regions, the best alternative among the three proposed development projects is the redevelopment and operation of the North Korea Highway between South Korea and China. The development of the AH1 section from Tokyo, Japan to Dongbei, in Northeast China, has a synergy effect on the Chinese economy, generating 0.538% GDP growth. Our simulation of the model provides public agents and stockholders with analytical and strategic insights into the investment efficiency, effectiveness, and priority level of the proposed highway project in terms of national and regional economic goals.