Common Transport Infrastructure : A Quantitative Model and Estimates from the Belt and Road Initiative
This paper presents a structural general equilibrium model to analyze the effects on trade, welfare, and gross domestic product of common transport infrastructure. Specifically, the model builds on the framework by Caliendo and Parro (2015) -- a Ri...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/879031554144957551/Common-Transport-Infrastructure-A-Quantitative-Model-and-Estimates-from-the-Belt-and-Road-Initiative http://hdl.handle.net/10986/31496 |
| Summary: | This paper presents a structural general
equilibrium model to analyze the effects on trade, welfare,
and gross domestic product of common transport
infrastructure. Specifically, the model builds on the
framework by Caliendo and Parro (2015) -- a Ricardian model
with sectoral linkages, trade in intermediate goods and
sectoral heterogeneity -- to allow for changes in trade
costs due to improvements in transportation infrastructure,
financed through domestic taxation, connecting multiple
countries. The model highlights the trade impact of
infrastructure investments through cross-border input-output
linkages. This framework is then used to quantify the impact
of the Belt and Road Initiative. Using new estimates on the
effects on trade costs of transport infrastructure related
to the initiative based on Geographic Information System
analysis, the model shows that gross domestic product will
increase by up to 3.4 percent for participating countries
and by up to 2.9 percent for the world. Because trade gains
are not commensurate with projected investments, some
countries may experience a negative welfare effect due to
the high cost of the infrastructure. The analysis also finds
strong complementarity between infrastructure investment and
trade policy reforms. |
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