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Pricing and investment of cross-border transport infrastructure

Author

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  • Se-il Mun

    () (Graduate School of Economics, Kyoto University)

  • Shintaro Nakagawa

    (Institute of Economic Research, Kyoto University)

Abstract

We develop a simple two-country model of international trade in which the transportation cost between countries is endogenously determined by decisions concerning capacity and price (road toll, rail fare) of infrastructure. We evaluate alternative regimes of pricing and investment, i.e., free access (e.g., public road), pricing and investment by two governments, and private operation. Comparisons between free-access and other regimes reveal that pricing plays a positive role of encouraging investment. However, pricing by governments results in lower welfare since excessively high prices are charged. We also show that higher welfare could be attained by elaborating the design of bidding systems for the right to build and operate the infrastructure.

Suggested Citation

  • Se-il Mun & Shintaro Nakagawa, 2008. "Pricing and investment of cross-border transport infrastructure," KIER Working Papers 661, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:661
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    References listed on IDEAS

    as
    1. Se-il Mun & Shintaro Nakagawa, 2008. "Cross-border transport infrastructure and aid policies," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(2), pages 465-486, June.
    2. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 34(1), pages 13-35.
    3. Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
    4. De Borger, B. & Dunkerley, F. & Proost, S., 2007. "Strategic investment and pricing decisions in a congested transport corridor," Journal of Urban Economics, Elsevier, vol. 62(2), pages 294-316, September.
    5. Yang, Hai & Meng, Qiang, 2000. "Highway pricing and capacity choice in a road network under a build-operate-transfer scheme," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(3), pages 207-222, April.
    6. Verhoef, Erik T., 2007. "Second-best road pricing through highway franchising," Journal of Urban Economics, Elsevier, vol. 62(2), pages 337-361, September.
    7. Eric W. Bond, 2006. "Transportation Infrastructure Investments And Trade Liberalization," The Japanese Economic Review, Japanese Economic Association, vol. 57(4), pages 483-500.
    8. Bougheas, Spiros & Demetriades, Panicos O. & Morgenroth, Edgar L. W., 1999. "Infrastructure, transport costs and trade," Journal of International Economics, Elsevier, vol. 47(1), pages 169-189, February.
    9. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
    10. David Levinson, 2000. "Revenue Choice on a Serial Network," Working Papers 200001, University of Minnesota: Nexus Research Group.
    11. Anderson, Simon P. & de Palma, Andre & Thisse, Jacques-Francois, 1988. "The CES and the logit : Two related models of heterogeneity," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 155-164, February.
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    Cited by:

    1. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
    2. Se-il Mun, 2016. "Joint Provision of International Transport Infrastructure," Discussion papers e-15-015, Graduate School of Economics , Kyoto University.
    3. Masafumi Tsubuku, 2016. "Endogenous transport costs and firm agglomeration in new trade theory," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 353-362, June.

    More about this item

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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