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Trade and The Spatial Distribution of Transport Infrastructure

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  • Gabriel J. Felbermayr
  • Alexander Tarasov

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 J. Felbermayr & Alexander Tarasov, 2015. "Trade and The Spatial Distribution of Transport Infrastructure," Working Papers 2015-29, CEPII research center.
  • Handle: RePEc:cii:cepidt:2015-29
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    Cited by:

    1. Pablo D. Fajgelbaum & Edouard Schaal, 2017. "Optimal Transport Networks in Spatial Equilibrium," NBER Working Papers 23200, National Bureau of Economic Research, Inc.
    2. Gabriel Felbermayr & Jasmin Katrin Gröschl & Thomas Steinwachs, 2016. "Handelseffekte von Grenzkontrollen," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 73.

    More about this item

    Keywords

    Economic Geography; International Trade; Infrastructure Investment; Border Effect Puzzle;

    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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