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Geographic connectivity and cross-border investment: The Belts, Roads and Skies

Maggie Xiaoyang Chen and Chuanhao Lin

Journal of Development Economics, 2020, vol. 146, issue C

Abstract: How much have falling transport costs through the diffusion of transport networks contributed to the growth of cross-border investment? Exploring rich cross-country transport network and travel time data and exogenous sources of variations from cost and supply requirements of transportation technology, we show that expanding transport networks have reshaped the spatial organization and distance elasticities of cross-border investments. The proliferation of direct flights, liner shipping, and high-speed rail have flattened the spatial distribution of global investments and contributed to a 27-percent increase in the world's cross-border investment in 2000–2012. The analysis also predicts that the Belt and Road Initiative, the most ambitious transport initiative in recent history, could further raise cross-border investment by 3 percent for participating countries and 1 percent for non-participating countries via network spillovers. The effects vary, however, with market size, regulatory efficiency, and trade integration and are especially vital for developing nations with less attractive market and institutional characteristics.

Keywords: Transport network; Travel time; Cross-border investment; BRI (search for similar items in EconPapers)
JEL-codes: F1 F2 O1 O4 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:146:y:2020:i:c:s0304387820300444

DOI: 10.1016/j.jdeveco.2020.102469

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