Regional Economies of Scale in Transportation and Regional Welfare

Alexandre Skiba ()

No 200705, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: A discriminatory tariff can be welfare superior to free trade in the presence of regional economies of scale. This is because a tariff on non-regional trade concentrates trade within a region, lowering the cost of transportation, so that the gains from economies of scale can theoretically offset the losses from the tariff. To complement the theoretical point I estimate the relation between transportation cost and regional volume of trade. The estimates suggest that a 10% increase in the volume of trade brings about 2.5% reduction in transportation cost in the long run.

Keywords: regional economies of scale; transportation costs; preferential trade agreements; regional welfare (search for similar items in EconPapers)
JEL-codes: F10 F12 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-09, Revised 2007-09
New Economics Papers: this item is included in nep-geo, nep-int and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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