Trade, Transport, and Territorial Development
The spatial distribution of economic activity is known to depend on trade costs, both international and domestic. This paper examines the interplay between these external and internal trade costs using a model of trade and production that is tested...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099431205252212181/IDU03622756009bfa0481e0aac80fa93523a16fe http://hdl.handle.net/10986/37477 |
| Summary: | The spatial distribution of economic
activity is known to depend on trade costs, both
international and domestic. This paper examines the
interplay between these external and internal trade costs
using a model of trade and production that is tested with
the organized manufacturing sector data for India from 1989
to 2009. The analysis establishes that the trade
liberalization episode of the early 1990s helped spread
manufacturing away from the primary region (districts
closest to ports) to the secondary region between 1994 and
2000. Such dispersion of activity away from the primary to
the secondary region was driven by high internal trade costs
that insulated manufacturers from import competition. This
trend reversed post-2000, a period of massive decline in
internal trade costs, attributed to the Golden Quadrilateral
highway upgrades. During this period, the districts along
the highway network in the secondary region gained market
access and manufacturing activity, while those off the
network lost. Irrespective of the period, or the nature of
trade costs, manufacturing activity in the interior region
(districts farthest from ports) remained depressed, thereby
emphasizing the importance of complementary conditions in
driving territorial development. |
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