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

50 Pages Posted: 15 Jun 2020

See all articles by Francois de Soyres

Francois de Soyres

Board of Governors of the Federal Reserve System

Alen Mulabdic

World Bank

Michele Ruta

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

Multiple version iconThere are 2 versions of this paper

Date Written: February, 2020

Abstract

This paper presents a structural general equilibrium model to analyze the effects on trade, welfare, and gross domestic product of common transport infrastructure. The model builds on Caliendo and Parro (2015) 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, 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.

JEL Classification: F10, F11, F14

Suggested Citation

de Soyres, Francois and Mulabdic, Alen and Ruta, Michele, Common Transport Infrastructure: A Quantitative Model and Estimates from the Belt and Road Initiative (February, 2020). FRB International Finance Discussion Paper No. 1273, Available at SSRN: https://ssrn.com/abstract=3625092 or http://dx.doi.org/10.17016/IFDP.2020.1273

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Alen Mulabdic

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Michele Ruta

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