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Trade and the Spatial Distribution of Transport Infrastructure

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  • Gabriel Felbermayr
  • Alexander Tarasov
  • Gabriel J. Felbermayr

Abstract

The distribution of transport infrastructure across space is the outcome of deliberate government planning that reflects a desire to unlock the welfare gains from regional economic integration. Yet, despite being one of the oldest government activities, the economic forces shaping the endogenous emergence of infrastructure have not been rigorously studied. This paper provides a stylized analytical framework of open economies in which planners decide non-cooperatively on transport infrastructure investments across continuous space. Allowing for intra- and international trade, the resulting equilibrium investment schedule features underinvestment that turns out particularly severe in border regions and that is amplified by the presence of discrete border costs. In European data, the mechanism explains about a fifth of the border effect identified in a conventionally specified gravity regression. The framework sheds light on the welfare costs of second best investment schedules, on the effects of intercontinental trade or of privatized infrastructure provision.

Suggested Citation

  • Gabriel Felbermayr & Alexander Tarasov & Gabriel J. Felbermayr, 2015. "Trade and the Spatial Distribution of Transport Infrastructure," CESifo Working Paper Series 5634, CESifo.
  • Handle: RePEc:ces:ceswps:_5634
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    2. Akihiko Yanase & Ngo Van Long & Ngo Van Long, 2020. "Trade Costs and Strategic Investment in Infrastructure in a Dynamic Global Economy with Symmetric Countries," CESifo Working Paper Series 8707, CESifo.
    3. Gabriel Loumeau, 2020. "Regional Borders, Commuting and Transport Network Integration," KOF Working papers 20-489, KOF Swiss Economic Institute, ETH Zurich.
    4. Hannes Thees, 2020. "Towards Local Sustainability of Mega Infrastructure: Reviewing Research on the New Silk Road," Sustainability, MDPI, vol. 12(24), pages 1-35, December.
    5. Rym Aloui & Aurélien Eyquem, 2020. "The Welfare Gains of Cooperative Public Infrastructure Policies: A Trade and Supply-Side View," Annals of Economics and Statistics, GENES, issue 140, pages 27-44.
    6. Gabriel Felbermayr & Jasmin Katrin Gröschl & Thomas Steinwachs, 2016. "Handelseffekte von Grenzkontrollen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(05), pages 18-27, March.
    7. Maximilian v. Ehrlich & Henry G. Overman, 2020. "Place-Based Policies and Spatial Disparities across European Cities," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 128-149, Summer.
    8. Remi Jedwab & Adam Storeygard, 2017. "The Average and Heterogeneous Effects of Transportation Investments: Evidence from sub-Saharan Africa 1960-2010," Discussion Papers Series, Department of Economics, Tufts University 0822, Department of Economics, Tufts University.
    9. Roberto Bonfatti & Yuan Gu & Steven Poelhekk, 2019. "Priority roads: The political economy of Africa's interior-to-coast roads," Discussion Papers 2019-04, University of Nottingham, GEP.
    10. Pablo D. Fajgelbaum & Edouard Schaal, 2020. "Optimal Transport Networks in Spatial Equilibrium," Econometrica, Econometric Society, vol. 88(4), pages 1411-1452, July.
    11. Santamaria, Marta, 2020. "Reshaping Infrastructure: Evidence from the division of Germany," The Warwick Economics Research Paper Series (TWERPS) 1244, University of Warwick, Department of Economics.
    12. Santamaria, Marta, 2020. "Reshaping Infrastructure : Evidence from the division of Germany," CAGE Online Working Paper Series 456, Competitive Advantage in the Global Economy (CAGE).
    13. Dias, Lucas & Haddad, Eduardo & Maggi, Andrés, 2020. "Optimal Road Network and the Gains from Intranational Trade," TD NEREUS 15-2020, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    14. Lorz, Oliver, 2020. "Investment in trade facilitating infrastructure: A political-economy analysis," European Journal of Political Economy, Elsevier, vol. 65(C).
    15. Meurers, Martin & Moenius, Johannes, 2018. "Optimal Public Investment in Economic Centers and the Periphery," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181579, Verein für Socialpolitik / German Economic Association.
    16. Rym Aloui & Aurélien Eyquem, 2020. "The Welfare Gains of Cooperative Public Infrastructure Policies: A Trade and Supply-Side View," Annals of Economics and Statistics, GENES, issue 140, pages 27-44.

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    More about this item

    Keywords

    economic geography; international trade; infrastructure investment; border effect puzzle;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • 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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