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Changes in Infrastructure and Tariff Barriers: Local Vs. Global Impacts


  • Behrens, Kristian
  • Lamorgese, Andrea
  • Ottaviano, Gianmarco
  • Tabuchi, Takatoshi


We develop a multi-country Dixit-Stiglitz model to investigate the impacts of: (i) changes in the international distribution of consumers' expenditure; (ii) decreasing tariffs; and (iii) improvements in transportation infrastructure. We show that, in general, decreasing tariff barriers do not allow for any clear predictions regarding changes in industry location and welfare, whereas this is possible with respect to improvements in transportation infrastructure. In particular, infrastructural improvements have spatially limited impacts when the transportation network is locally described by a tree. Any decrease in transport costs is Pareto welfare enhancing in this case.

Suggested Citation

  • Behrens, Kristian & Lamorgese, Andrea & Ottaviano, Gianmarco & Tabuchi, Takatoshi, 2005. "Changes in Infrastructure and Tariff Barriers: Local Vs. Global Impacts," CEPR Discussion Papers 5103, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5103

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    References listed on IDEAS

    1. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
    2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    3. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    4. Falvey, Rodney E, 1976. "Transport Costs in the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 86(343), pages 536-550, September.
    5. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, January.
    6. 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.
    7. 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.
    8. Suedekum, Jens, 2005. "The Home Market Shadow," IZA Discussion Papers 1462, Institute for the Study of Labor (IZA).
    9. Takatoshi Tabuchi & Kristian Behrens & Andrea R. Lamorgese, 2004. "Testing the Home Market Effects in a Multi-country World: The Theory," Econometric Society 2004 Far Eastern Meetings 595, Econometric Society.
    10. 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.
    11. 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.
    12. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
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    Cited by:

    1. J. Suedekum, 2007. "Identifying the dynamic home market effect in a three-country model," Journal of Economics, Springer, vol. 92(3), pages 209-228, December.
    2. Andrea R. Lamorgese, 2008. "Innovation driven sectoral shocks and aggregate city cycles," Temi di discussione (Economic working papers) 667, Bank of Italy, Economic Research and International Relations Area.
    3. Masahisa Fujita & Tomoya Mori, 2005. "Frontiers of the New Economic Geography-super-," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 377-405, August.
    4. Frédéric Robert-Nicoud, 2006. "Agglomeration and Trade with Input–Output Linkages and Capital Mobility," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(1), pages 101-126.

    More about this item


    home market effect; imperfect competition; international integration; multi-country trade models; transportation networks;

    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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