A normative analysis of transport policies in a footloose capital model with interregional and intraregional transportat
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A normative analysis of transport policies in a footloose capital model with interregional and intraregional transportation costs Paul Chiambaretto · André De Palma · Stef Proost
Received: 9 January 2012 / Accepted: 26 February 2013 © Springer-Verlag Berlin Heidelberg 2013
Abstract We introduce a distinction between interregional and intraregional transportation costs in a footloose capital model. This allows assessing more precisely the effects of different types of transport policies on the spatial distribution of activities. From a normative point of view, we find that, in the absence of regulation, the concentration of industrial activity is too high in the center. We show what set of interregional and intraregional transport policies improves the equilibrium. JEL Classification
R11 · R12 · R13 · R42 · R48 · R58
1 Introduction In economic geography, the normative aspect is too often neglected. If the agglomeration phenomenon has been well documented, its fairness is generally not addressed. Also, Martin (2000) found that, in economic geography, one should devote more attention to this trade-off between efficiency and equity. As Bairoch (1997) explains,
P. Chiambaretto (B) PREG-CRG, Ecole Polytechnique, Batiment Ensta, 828 bd des Maréchaux, 91762 Palaiseau, France e-mail: [email protected] A. De Palma ENS Cachan, 61 av du Pr. Wilson, 94235 Cachan, France e-mail: [email protected] A. De Palma Centre d’Economie de la Sorbonne, University Paris I, Paris, France S. Proost Center for Economic Studies, KU Leuven, Naamsestraat 69, 3000 Louvain, Belgium e-mail: [email protected]
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throughout the nineteenth century, transportation costs have decreased by a factor of ten, and at the very same time, inequalities between countries have emerged: the standard deviation of GDP per capita in Europe has been multiplied by 7.5. A very detailed analysis of this phenomenon is given by Lafourcade and Thisse (2011) showing that reduction in trade costs is one of the causes of these inequalities. In this paper, using a framework that distinguishes between interregional and intraregional transportation costs, we study the agglomeration effects from a normative point of view. This allows to study the effects of transport policies on the spatial equilibrium and its efficiency and regional inequality aspects. Different analytical models (Krugman 1980; Helpman and Krugman 1985; Krugman 1991) have progressively built the basic theory to understand the relation between interregional trade costs and industrial location. These basic models have two points in common: first, they all find that the reduction in interregional transportation costs will increase inequalities between regions. Second, they all use the same assumption: they consider regions as dots, without spatial dimension, and so do neglect intraregional transportation costs (see Behrens and Thisse 2007). The intraregional transportation costs are important, and an entire field of economics has been developed t
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