Changes in Transport and Non Transport Costs: Local vs. Global Impacts in a Spatial Network

41 Pages Posted: 25 May 2007

See all articles by Kristian Behrens

Kristian Behrens

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE); Université de Bourgogne - LATEC

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Andrea Roberto Lamorgese

Bank of Italy

Takatoshi Tabuchi

University of Tokyo - Faculty of Economics

Date Written: April 2007

Abstract

We develop a multi-country Dixit-Stiglitz trade model and analyze how industry location and welfare respond to changes in: (i) transport frictions (e.g., infrastructure, transportation technology); and (ii) non-transport frictions (e.g., tariffs, standards and regulations). We show that changes in non-transport frictions, which are usually origin-destination specific, do not allow for any clear prediction as to changes in industry location and welfare; whereas changes in transport frictions, which are usually not origin-destination specific, may allow for such predictions. In particular, we show that reductions in transport frictions occurring at links around which the spatial network is locally a tree are Pareto welfare improving.

Keywords: trade frictions, multi-country trade models, monopolistic competition, spatial networks, international integration

JEL Classification: D58, F12, F17, R12

Suggested Citation

Behrens, Kristian and Ottaviano, Gianmarco I.P. and Lamorgese, Andrea Roberto and Tabuchi, Takatoshi, Changes in Transport and Non Transport Costs: Local vs. Global Impacts in a Spatial Network (April 2007). Bank of Italy Temi di Discussione (Working Paper) No. 628, Available at SSRN: https://ssrn.com/abstract=988322 or http://dx.doi.org/10.2139/ssrn.988322

Kristian Behrens (Contact Author)

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

HOME PAGE: http://www.core.ucl.ac.be:16080/~behrens/

Université de Bourgogne - LATEC

Pôle d'Economie et de Gestion
21066 Dijon Cedex
France

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )

Via Gobbi 5
Milan, 20136
Italy

Andrea Roberto Lamorgese

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy
+39 06 4792 3441 (Phone)
+39 06 4792 2601 (Fax)

Takatoshi Tabuchi

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan
+81 3 5841 5603 (Phone)
+81 3 5841 5521 (Fax)

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