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Transport liberalization and regional imbalances with endogenous freight rates

Francesco Di Comite

No JRC92386, JRC Working Papers from Joint Research Centre (Seville site)

Abstract: This paper develops a tractable two-region New Economic Geography model with footloose capital and endogenous freight rates to investigate the welfare implications and long-run industry reallocation patterns triggered by transport liberalization. Two policy scenarios are considered: one where a unique tariff per route is imposed, independently of the direction of shipment, and one of complete deregulation. Carriers in fully deregulated transport markets are shown to charge higher markups in shipments towards the periphery. This pricing behavior counterbalances the welfare-decreasing agglomeration forces associated with lowering trade costs and ensures welfare gains in both region in the short and long run.

Keywords: Transport liberalization; endogenous transport costs; regional imbalances; Home Market Effect (search for similar items in EconPapers)
JEL-codes: L98 R12 R58 O18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-int, nep-tre and nep-ure
Date: 2018-07
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Persistent link: https://EconPapers.repec.org/RePEc:ipt:iptwpa:jrc92386

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