Changes in Infrastructure and Tariff Barriers: Local vs. Global Impacts
34 Pages Posted: 8 Aug 2005
Date Written: June 2005
Abstract
We develop a multi-country Dixit-Stiglitz model to investigate the impacts of: (i) changes in the international distribution of consumers' expenditure; (ii) decreasing tariffs; and (iii) improvements in transportation infrastructure. We show that, in general, decreasing tariff barriers do not allow for any clear predictions regarding changes in industry location and welfare, whereas this is possible with respect to improvements in transportation infrastructure. In particular, infrastructural improvements have spatially limited impacts when the transportation network is locally described by a tree. Any decrease in transport costs is Pareto welfare enhancing in this case.
Keywords: Multi-country trade models, imperfect competition, transportation networks, international integration, home market effect
JEL Classification: D58, F12, F17, R12
Suggested Citation: Suggested Citation
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