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Industrial Location and Public Infrastructure

Author

Listed:
  • Martin, Philippe
  • Rogers, Carol Ann

Abstract

This paper examines the impact of public infrastructure on industrial location when increasing returns are present. Poor infrastructure implies costs of Samuelson's `iceberg' form and alter trade both within and between countries. Trade integration implies that firms tend to locate in countries with better infrastructure so that regional policies that affect the level of public infrastructure influence economic geography. The effectiveness of such policies decreases when infrastructure improves, however, because a high level of infrastructure and strong economies of scale magnify the concentration effects of differentials in infrastructure, market size and capital-labour ratios. Infrastructure policies that facilitate intra-regional trade in the poor country lead to regional convergence but policies that facilitate intra-regional trade lead to regional divergence. We also analyse the incentives for countries to inhibit industrial relocation.

Suggested Citation

  • Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:909
    as

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    References listed on IDEAS

    as
    1. Vickerman, R W, 1989. "Measuring Changes in Regional Competitiveness: The Effects of International Infrastructure Investments," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 23(4), pages 275-286.
    2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    3. Bertola, Giuseppe, 1992. "Models of Economic Integration and Localized Growth," CEPR Discussion Papers 651, C.E.P.R. Discussion Papers.
    4. Krugman, Paul R, 1993. "On the Relationship between Trade Theory and Location Theory," Review of International Economics, Wiley Blackwell, vol. 1(2), pages 110-122, June.
    5. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    6. Martin, Philippe & Rogers, Carol Ann, 1994. "Trade Effects of Regional Aid," CEPR Discussion Papers 910, C.E.P.R. Discussion Papers.
    7. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    8. Krugman, Paul & Venables, Anthony J, 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Industrial Location; Public Infrastructure; Regional Policies; Trade Integration;

    JEL classification:

    • F1 - International Economics - - Trade
    • H4 - Public Economics - - Publicly Provided Goods
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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