Common Transport Infrastructure: A Quantitative Model and Estimates from the Belt and Road Initiative

Abstract

This paper presents a structural general equilibrium model to analyze the effects on trade, welfare, and gross domestic product of common transport infrastructure. The model builds on Caliendo and Parro (2015) 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, 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 Influencing Factors of Exports of Sichuan under the Belt and Road Initiative: An Empirical Study Based on the Extended Trade Gravity Model

“…In general, the total labor endowment has been dominated by low-skilled labor currently in Sichuan, so the negative effect of human capital level on exports is reasonable. (7) The impact from the TAR did not pass the significance test and this is because one goal of the BRI is to achieve unimpeded trade between the member countries. Accordingly, China has signed many bilateral trade agreements with the BRI countries under the promotion of this policy and the weighted average TAR cannot reflect these reciprocal tariffs.…”