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Transport liberalization and regional imbalances with endogenous freight rates

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Abstract

This paper develops a tractable two-region New Economic Geography model with footloose capital and endogenous freight rates to investigate the welfare implications and long-run industry reallocation patterns triggered by transport liberalization. Two policy scenarios are considered: one where a unique tariff per route is imposed, independently of the direction of shipment, and one of complete deregulation. Carriers in fully deregulated transport markets are shown to charge higher markups in shipments towards the periphery. This pricing behavior counterbalances the welfare-decreasing agglomeration forces associated with lowering trade costs and ensures welfare gains in both region in the short and long run.

Suggested Citation

  • Francesco Di Comite, 2018. "Transport liberalization and regional imbalances with endogenous freight rates," JRC Working Papers JRC92386, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:iptwpa:jrc92386
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    File URL: http://publications.jrc.ec.europa.eu/repository/handle/JRC92386
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    References listed on IDEAS

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    1. Takahashi, Takaaki, 2011. "Directional imbalance in transport prices and economic geography," Journal of Urban Economics, Elsevier, vol. 69(1), pages 92-102, January.
    2. Belleflamme, Paul & Picard, Pierre & Thisse, Jacques-Francois, 2000. "An Economic Theory of Regional Clusters," Journal of Urban Economics, Elsevier, vol. 48(1), pages 158-184, July.
    3. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    4. Joern Kleinert & Julia Spies, 2011. "Endogenous Transport Costs in International Trade," IAW Discussion Papers 74, Institut für Angewandte Wirtschaftsforschung (IAW).
    5. Picard, Pierre M. & Zeng, Dao-Zhi, 2005. "Agricultural sector and industrial agglomeration," Journal of Development Economics, Elsevier, vol. 77(1), pages 75-106, June.
    6. repec:oup:jecgeo:v:17:y:2017:i:1:p:217-232. is not listed on IDEAS
    7. Kiyoyasu Tanaka & Kenmei Tsubota, 2017. "Directional imbalance in freight rates: evidence from Japanese inter-prefectural data," Journal of Economic Geography, Oxford University Press, vol. 17(1), pages 217-232.
    8. Fujita, Masahisa, 1988. "A monopolistic competition model of spatial agglomeration : Differentiated product approach," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 87-124, February.
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    More about this item

    Keywords

    Transport liberalization; endogenous transport costs; regional imbalances; Home Market Effect;

    JEL classification:

    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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