The CEPR and Portal websites will be unavailable between 12:45GMT and 13:00GMT on Friday, 30th October 2020 due to maintenance.

DP5103 | Changes in Infrastructure and Tariff Barriers: Local Vs. Global Impacts

Publication Date

23/06/2005

JEL Code(s)

Keyword(s)

Programme Area(s)

Network(s)

Abstract

We develop a multi-country Dixit-Stiglitz model to investigate the impacts of: (i) changes in the international distribution of consumers' expenditure; (ii) decreasing tariffs; and (iii) improvements in transportation infrastructure. We show that, in general, decreasing tariff barriers do not allow for any clear predictions regarding changes in industry location and welfare, whereas this is possible with respect to improvements in transportation infrastructure. In particular, infrastructural improvements have spatially limited impacts when the transportation network is locally described by a tree. Any decrease in transport costs is Pareto welfare enhancing in this case.