The Geographic Effects of Trade Liberalization with Increasing Returns in Transportation

Kashif S. Mansori

Journal of Regional Science, 2003, vol. 43, issue 2, 249-268

Abstract: Abstract This paper develops a model of economic geography that examines how the distribution of economic activity may change as a country opens up to foreign trade. The distinctive features of the model are that transportation is costly between locations within a nation as well as between nations, and that these transportation costs are subject to increasing returns to scale. A result of the model is that trade liberalization may cause the population of a country to become more concentrated in a single megalopolis. The large megalopolis may reduce welfare due to congestion costs, which implies that liberalization may unexpectedly leave the country worse off.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jregsc:v:43:y:2003:i:2:p:249-268

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