Common Transport Infrastructure: A Quantitative Model and Estimates from the Belt and Road Initiative

46 Pages Posted: 3 Apr 2019 Last revised: 1 Aug 2019

See all articles by Francois Michel Marie Raphael De Soyres

Francois Michel Marie Raphael De Soyres

World Bank

Alen Mulabdic

World Bank

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

Date Written: April 1, 2019

Abstract

This paper presents a structural general equilibrium model to analyze the effects on trade, welfare, and gross domestic product of common transport infrastructure. Specifically, the model builds on the framework by Caliendo and Parro (2015) -- a Ricardian model with sectoral linkages, trade in intermediate goods and sectoral heterogeneity -- to allow for changes in trade costs due to improvements in transportation infrastructure, financed through domestic taxation, connecting multiple countries. The model highlights the trade impact of infrastructure investments through cross-border input-output linkages. This framework is then used to quantify the impact of the Belt and Road Initiative. Using new estimates on the effects on trade costs of transport infrastructure related to the initiative based on Geographic Information System analysis, the model shows that gross domestic product will increase by up to 3.4 percent for participating countries and by up to 2.9 percent for the world. Because trade gains are not commensurate with projected investments, some countries may experience a negative welfare effect due to the high cost of the infrastructure. The analysis also finds strong complementarity between infrastructure investment and trade policy reforms.

Keywords: International Trade and Trade Rules, Transport Services, Rules of Origin, Trade Policy, Trade and Multilateral Issues

Suggested Citation

De Soyres, Francois Michel Marie Raphael and Mulabdic, Alen and Ruta, Michele, Common Transport Infrastructure: A Quantitative Model and Estimates from the Belt and Road Initiative (April 1, 2019). World Bank Policy Research Working Paper No. 8801. Available at SSRN: https://ssrn.com/abstract=3363985

Francois Michel Marie Raphael De Soyres (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Alen Mulabdic

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Michele Ruta

Economic Research Division, WTO ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

HOME PAGE: http://www.iue.it/Personal/Fellows/MicheleRuta/Welcome.htm

Columbia Business School - Economics Department ( email )

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New York, NY 10027
United States

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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