Transportation Costs, Agricultural Productivity, And Cross‐Country Income Differences
There are large differences in transportation infrastructure across nations. Constructing a measure of transportation infrastructure density for a large set of countries, I show that the disparity in this measure between the 5% income rich and the 5% income poor countries is a factor of 28. Are these differences a source of productivity differences across nations? Using a three-sector, two-region, general equilibrium model, I show that high transport costs can distort the allocation of resources not only across geographically dispersed production units within sectors but also between agriculture and non-agriculture. Taking as given the observed differences in transportation infrastructure densities, I quantify the role of transportation for cross-country income differences. The calibrated model produces an income disparity of 10.9 between the 5% rich and 5% poor countries. This corresponds to an improvement of 35% relative to the disparity predicted by a two sector model of agriculture and non-agriculture. Furthermore, the effects of advancements in transportation are non-linear: the elasticity of aggregate labor productivity with respect to the stock of transportation infrastructure in the poorest nations is 15 times higher than in the richest ones
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Volume (Year): 52 (2011)
Issue (Month): 2 (05)
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diegor-03-01, University of Toronto, Department of Economics.
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- Canning, David, 1998. "A Database of World Stocks of Infrastructure, 1950-95," World Bank Economic Review, World Bank Group, vol. 12(3), pages 529-47, September.
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