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The Geographic Effects of Trade Liberalization with Increasing Returns in Transportation
Author(s) -
Mansori Kashif S.
Publication year - 2003
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/1467-9787.00298
Subject(s) - megalopolis , economics , liberalization , welfare , free trade , population , international economics , distribution (mathematics) , international trade , scale (ratio) , economic geography , geography , market economy , mathematical analysis , demography , mathematics , sociology , cartography
This paper develops a model of economic geography that examines how the distribution of economic activity may change as a country opens up to foreign trade. The distinctive features of the model are that transportation is costly between locations within a nation as well as between nations, and that these transportation costs are subject to increasing returns to scale. A result of the model is that trade liberalization may cause the population of a country to become more concentrated in a single megalopolis. The large megalopolis may reduce welfare due to congestion costs, which implies that liberalization may unexpectedly leave the country worse off.