Trade and the Spatial Distribution of Transport Infrastructure

Alexander Tarasov and Gabriel Felbermayr

No 393, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: This paper constructs a theoretical model, in which transportation costs between two locations depend on cumulative infrastructure investment and governments allocate infrastructure spending over continuous space, thereby affecting the geographical pattern of transportation costs. Modelling international trade, we assume that governments set their infrastructure investment schedules in a non-cooperative fashion. We find that governments provide too little infrastructure investment because they ignore the benefits from reductions in domestic transportation costs that accrue to foreign consumers. Moreover, the distribution of infrastructure chosen by local governments is skewed towards central regions, which magnifies small discrete border frictions and creates `border regions' within countries. French data on transportation costs are consistent with our theory.

Date: 2015
New Economics Papers: this item is included in nep-geo, nep-int, nep-tre and nep-ure
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Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Trade and the spatial distribution of transport infrastructure (2022)
Working Paper: Trade and the Spatial Distribution of Transport Infrastructure (2015)
Working Paper: Trade and The Spatial Distribution of Transport Infrastructure (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:393

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