The Belt and Road Initiative: Macro and Sectoral Impacts

Maryla Maliszewska and Dominique van der Mensbrugghe

No 333005, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: China’s Belt and Road Initiative (BRI) is an ambitious effort to improve connectivity between China and more than 65 countries through infrastructure investment and regional cooperation. The initiative has the potential to significantly accelerate the rate of economic integration and development in the region, as trade costs decline. The goals of our analysis are to i) study the impacts of infrastructure improvements on the BRI countries’ trade flows, growth and poverty, ii) estimate the potential impacts on the non-BRI countries, iii) suggest policies that would help maximize gains from the BRI-induced trade cost declines. We use the updated data on “value of time” from de Soyres et. al. (2018), which is based on Hummels and Schaur (2013) original estimates updated with trade flows from 2011 to match the GTAP version 10. In our simulations, these initial estimates of the value of time in trade are adjusted based on the GIS estimates of the impacts of Belt and Road Initiative projects on the shipment time decrease based on Baniya et. al. (2018). Summary conclusions include: •Global real income increases by 0.6 percent (in 2030 relative to the baseline), which in comparative terms is relatively sizeable as upper estimates of the real income impact of global free trade are around 1 percent. This translates to almost half trillion dollars in 2014 prices and market exchange rates. •The BRI Area captures 82 percent of the gain, with China garnering 36 percent of the total global gain. In percentage terms, the largest return accrues to the East Asia regional aggregate seeing an increase of 2.2 percent in overall real income. •The non-BRI area seems some gains with an increase of 0.2 percent, most of which is captured by the European Union and the Rest of high-income region. These latter two regions, though not formally part of the BRI area, are the most integrated economies with the BRI area. There are minor losses for the regions in the Western Hemisphere.

Keywords: International; Development (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333005

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