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Pricing and investment of cross-border transport infrastructure

  • Mun, Se-il
  • Nakagawa, Shintaro

We develop a simple two-country model of international trade in which the transportation cost between countries is endogenously determined by pricing and investment decisions of cross-border transport infrastructure. We evaluate alternative regimes of pricing and investment, i.e., free access (e.g., public road), pricing by two governments, and private operation. We also examine the effect of integrating operation. It is shown that investment rule in free access regime is inefficient. On the other hand, the investment rule is efficient if infrastructure charge is levied either by the government or by the private operators. We obtain the welfare ranking of alternative regimes under specific functional form, show how the welfare results depend on pricing policies.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 40 (2010)
Issue (Month): 4 (July)
Pages: 228-240

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Handle: RePEc:eee:regeco:v:40:y:2010:i:4:p:228-240
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  1. Spiros Bougheas & Panicos Demetriades & Edgar Morgenroth, 1996. "Infrastructure, Transport Costs and Trade," Keele Department of Economics Discussion Papers (1995-2001) 96/7, Department of Economics, Keele University.
  2. Erik T. Verhoef, 2005. "Second-best Road Pricing Through Highway Franchising," Tinbergen Institute Discussion Papers 05-082/3, Tinbergen Institute.
  3. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer, vol. 34(1), pages 13-35.
  4. Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
  5. De Borger Bruno & Dunkerley Fay & Proost Stef, 2006. "Strategic investment and pricing decisions in a congested transport corridor," Energy, Transport and Environment Working Papers Series ete0602, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  6. Yang, Hai & Meng, Qiang, 2000. "Highway pricing and capacity choice in a road network under a build-operate-transfer scheme," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(3), pages 207-222, April.
  7. Se-il Mun & Shintaro Nakagawa, 2008. "Cross-border transport infrastructure and aid policies," The Annals of Regional Science, Springer, vol. 42(2), pages 465-486, June.
  8. Anderson, Simon P. & de Palma, Andre & Thisse, Jacques-Francois, 1988. "The CES and the logit : Two related models of heterogeneity," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 155-164, February.
  9. Eric W. Bond, 2006. "Transportation Infrastructure Investments And Trade Liberalization," The Japanese Economic Review, Japanese Economic Association, vol. 57(4), pages 483-500.
  10. David Levinson, 2000. "Revenue Choice on a Serial Network," Working Papers 200001, University of Minnesota: Nexus Research Group.
  11. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
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