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Public infrastructure for production and international trade in a small open economy: a dynamic analysis

Akihiko Yanase () and Makoto Tawada ()
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Makoto Tawada: Aichi Gakuin University

Journal of Economics, 2017, vol. 121, issue 1, No 3, 73 pages

Abstract: Abstract This paper develops a dynamic trade model with a stock of public infrastructure, which has a property of “unpaid factor of production”. We show that a country with a smaller (larger) labor endowment tends to become an exporter of a good whose productivity is more (less) sensitive to the stock of public infrastructure. We also show that after the opening of trade, the labor-scarce country becomes unambiguously better off but the labor-abundant country may become worse off. Overall, these results contrasts with those obtained in the case of public intermediate goods with a “creation of atmosphere” property.

Keywords: Semi-public intermediate good; Dynamic Lindahl pricing; Trade patterns; Long-run production possibility frontier; Gains or losses from trade (search for similar items in EconPapers)
JEL-codes: F11 H41 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s00712-016-0519-z

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