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Changes in transport and non transport costs: local vs. global impacts in a spatial network

Author

Listed:
  • Kristian Behrens

    () (CORE, Universit� Catholique de Louvain e LEG, Universit� de Bourgogne)

  • Andrea R. Lamorgese

    () (Banca d'Italia and Ente Luigi Einaudi)

  • Gianmarco I.P. Ottaviano

    () (Universit� di Bologna, FEEM e CEPR)

  • Takatoshi Tabuchi

    () (Faculty of Economics, University of Tokyo)

Abstract

We develop a multi-country Dixit-Stiglitz trade model and analyze how industry location and welfare respond to changes in: (i) transport frictions (e.g., infrastructure, transportation technology); and (ii) non-transport frictions (e.g., tariffs, standards and regulations). We show that changes in non-transport frictions, which are usually origin-destination specific, do not allow for any clear prediction as to changes in industry location and welfare; whereas changes in transport frictions, which are usually not origin-destination specific, may allow for such predictions. In particular, we show that reductions in transport frictions occurring at links around which the spatial network is locally a tree are Pareto welfare improving.

Suggested Citation

  • Kristian Behrens & Andrea R. Lamorgese & Gianmarco I.P. Ottaviano & Takatoshi Tabuchi, 2007. "Changes in transport and non transport costs: local vs. global impacts in a spatial network," Temi di discussione (Economic working papers) 628, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_628_07
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    References listed on IDEAS

    as
    1. BEHRENS, Kristian & LAMORGESE, Andrea R. & OTTAVIANO, Gianmarco I.P. & TABUCHI, Takatoshi, 2005. "Testing the ‘home market effect’ in a multi-country world," CORE Discussion Papers 2005055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    7. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669 Elsevier.
    8. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    9. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
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    11. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
    12. James H. Cassing, 1978. "Transport Costs in International Trade Theory: A Comparison with the Analysis of Nontraded Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 92(4), pages 535-550.
    13. Behrens, Kristian & Gaigne, Carl & Ottaviano, Gianmarco I.P. & Thisse, Jacques-Francois, 2007. "Countries, regions and trade: On the welfare impacts of economic integration," European Economic Review, Elsevier, vol. 51(5), pages 1277-1301, July.
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    Citations

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    Cited by:

    1. Pamela Bombarda, 2016. "Firm heterogeneity and the localization of economic activities," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 1-26, March.
    2. Jacques-François Thisse, 2010. "Toward A Unified Theory Of Economic Geography And Urban Economics," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 281-296.
    3. Ushchev, Philip & Zenou, Yves, 2015. "Price Competition in Product Variety Networks," CEPR Discussion Papers 10862, C.E.P.R. Discussion Papers.
    4. Stef Proost & Jacques-Francois Thisse, 2017. "What Can Be Learned from Spatial Economics?," HSE Working papers WP BRP 167/EC/2017, National Research University Higher School of Economics.
    5. Juan Labraga, 2009. "Política Comercial y Política de Infraestructura en el MERCOSUR," IDB Publications (Working Papers) 9328, Inter-American Development Bank.
    6. Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2009. "Beyond the home market effect: Market size and specialization in a multi-country world," Journal of International Economics, Elsevier, vol. 79(2), pages 259-265, November.
    7. Takatoshi Tabuchi, 2012. "Are NEG Models Capable of Simulating Agglomeration in the Real World?," CIRJE F-Series CIRJE-F-854, CIRJE, Faculty of Economics, University of Tokyo.
    8. Kaitila, Ville, 2013. "Specialisation and/or Convergence: Structure of European Exports and Production," ETLA Working Papers 12, The Research Institute of the Finnish Economy.
    9. Behrens, Kristian & Thisse, Jacques-Francois, 2007. "Regional economics: A new economic geography perspective," Regional Science and Urban Economics, Elsevier, vol. 37(4), pages 457-465, July.
    10. Pascal Mossay & Takatoshi Tabuchi, 2015. "Preferential Trade Agreements Harm Third Countries," Economic Journal, Royal Economic Society, vol. 125(589), pages 1964-1985, December.
    11. Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Clark University, vol. 88(2), pages 137-163, April.
    12. Kristian Behrens & Frédéric Robert-Nicoud, 2009. "Krugman's "Papers in Regional Science": The 100 dollar bill on the sidewalk is gone and the 2008 Nobel Prize well-deserved," Papers in Regional Science, Wiley Blackwell, vol. 88(2), pages 467-489, June.
    13. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2007. "Adding Geography to the New Economic Geography," CESifo Working Paper Series 2038, CESifo Group Munich.
    14. Arne Melchior, 2009. "East-West Integration and the Economic Geography of Europe," CASE Network Studies and Analyses 0379, CASE-Center for Social and Economic Research.
    15. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 696-713, November.
    16. Juan Labraga, 2009. "Política Comercial y Política de Infraestructura en el MERCOSUR," IDB Publications (Working Papers) 2545, Inter-American Development Bank.
    17. Pascal Mossay & Takatoshi Tabuchi, 2011. "A Note on the Decomposition Technique of Economic Indices," CIRJE F-Series CIRJE-F-811, CIRJE, Faculty of Economics, University of Tokyo.
    18. Carl Gaigné & Jacques-François Thisse, 2013. "New Economic Geography and the City," Working Papers SMART - LERECO 13-02, INRA UMR SMART-LERECO.
    19. Sauro Mocetti, 2012. "Educational choices and the selection process: before and after compulsory schooling," Education Economics, Taylor & Francis Journals, vol. 20(2), pages 189-209, February.
    20. Krieger-Boden, Christiane, 2016. "EU cohesion policy, past and present: Sustaining a prospering and fair European Union?," Kiel Working Papers 2037, Kiel Institute for the World Economy (IfW).
    21. Barbero, Javier & Behrens, Kristian & Zofio, Jose L., 2015. "Industry location and wages: The role of market size and accessibility in trading networks," CEPR Discussion Papers 10411, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    trade frictions; multi-country trade models; monopolistic competition; spatial networks; international integration;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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