Trade Liberalization and Regional Inequality - Do Transportation Costs Impose a Spatial Poverty Trap?

This paper focuses on the spatial impacts of barriers to trade, in the form of tariffs, in a national economy. More specifically, we are concerned with the spatial impediments for the internal transmission of the potential benefits of trade liberalization, in the form of high transportation costs that the more remote regions face. The strategy adopted in this research utilizes a spatial CGE model integrated to a geo-coded transportation model to evaluate shifts in the economic center of gravity and regional specialization in the Brazilian economy due to further liberal tariff policies. Comparative advantage is grasped through the use of differential regional production technologies; geographical advantage is verified through the explicit modeling of the transportation services, as well as increasing returns associated to agglomeration economies; and cumulative causation appears through the operation of internal and external multipliers and interregional spillover effects.

Regional Absorption of Terms of Trade Shocks

As the process of global integration evolves, developing economies become more and more dependent upon the swings of international markets. Changes in the external environment and economic policy have played a major role in determining the performance of these economies. Terms of trade shocks represent one of the most important issues related to recent developments in low and middle income countries, whose effects have been widely studied in the economic literature. However, attention has always been focused on the national economies, without any consideration of the ability of these economies to absorb these shocks through interregional interactions. In this paper we address this issue using an bottom-up interregional CGE model. It is shown that the degree of integration of the national economies helps to absorb external shocks, decreasing the adverse impacts of negative terms of trade shocks as the economy becomes more integrated.

Export and Regional Growth: A CGE Approach

The relationship between trade and growth has been a familiar topic of discussion in the development literature. More often, the question posed concerns the effects of international trade on economic growth, and thus focuses on trade as an active “agent” of growth. This active role played by international trade can be found in many different models. Todaro (1994) concludes that trade can be an important stimulus to rapid economic growth, although it might not be a desirable strategy for economic and social development. The contribution to development depends on the nature of the export sector, the distribution of its benefits, and the sector’s linkages with the rest of the economy. It seems that, to the extent we are only interested in the effects of international trade on pure economic growth, there is a consensus that trade can provide an important stimulus to growth. At the sub-national level, the export base theory provides the foundations to different models of regional development. Recently, however, given the focus on globalization issues and the implicit assumption that a region’s economic future is inextricably tied with its ability to compete in the international export market, international trade has attracted the attention of regional analysts as well. In this paper we address some of these issues. An interstate CGE model is implemented to simulate the likely implications of state export growth on the structure of the Brazilian economic interregional system. Key-words: regional development, computable general equilibrium, trade.

TRADE LIBERALIZATION AND REGIONAL INEQUALITY: DO TRANSPORTATION COSTS IMPOSE A SPATIAL POVERTY TRAP?

In this paper, we focus on the regional (intra-national) impacts of barriers to trade, in the form of tariffs, in a national economy. More specifically, we are concerned with the spatial impediments for the internal transmission of the potential benefits of trade liberalization, in the form of high transportation costs that the more remote regions face. A cost-competitiveness approach, base don relative changes in the sectoral and regional cost and demand structures, is adopted to isolate the likely spatial effects of further tariff reductions in Brazil. It tackles the three basis for the analytical framework proposed in the literature: comparative advantage is grasped through the use of differential regional production technologies; geographical advantage is verified through the explicit modeling of the transportation services and the costs of moving products based on origin-destination pairs, as well as increasing returns associated to agglomeration economies; and cumulative causation appears through the operation of internal and external multipliers and interregional spillover effects in comparative-static experiments, such as those proposed here.

Interdependence Among the Brazilian States: An Input-Output Approach

The principal aim of this paper is to evaluate the interregional linkages based on the many-region input-output table for Brazilian regions, for the year 1996, elaborated by FIPE. This work utilizes the extraction method by Strassert, 1968 and Schultz, 1977 and modified by Dietzenbacher et al (1993). Instead of extracting one sector from a sector-based model, we will examine the effects of hypothetically extracting a region from a many-region model. The method calculates the “backward linkagesâ€; the “forward linkages†are obtained analogously from the matrix of allocation coefficients. The application of the methodology to the Brazilian inter-regional input-output tables shows that the states with high share in the Brazilian GDP presents a high degree of intra-regional interdependence both in terms of backward and forward linkages.

Interdependência entre os Estados Brasileiros: Uma Análise de Insumo-Produto

Este trabalho objetiva calcular as interdependências inter-regionais a partir de uma matriz interestadual de insumo-produto para a economia brasileira. A matriz utilizada tem como ano base 1996 e foi elaborada pela FIPE. O presente artigo utiliza o método de extração de Strassert (1968) e Schultz (1977) que foi modificado por Dietzenbacher et alii (1993). Ao invés de extrair um setor de um modelo setorial, o trabalho examina os efeitos da extração hipotética de uma região em uma estrutura de insumo-produto inter-regional. O método permite calcular os efeitos para trás; o efeito para frente é obtido a partir da matriz de alocação. A aplicação do método para a matriz de insumo-produto para a economia brasileira mostra que as unidades da Federação com grande participação no PIB brasileiro apresentam um alto grau de interdependência intra-regional tanto em termos para frente quanto para trás.Método de Extração, Insumo-Produto Inter-Regional, Economia Regional

Structural Interdependence among Colombian Departments

This paper advances on the analysis of the structural interdependence among Colombian departments. The results show that Bogotá has a large influence in the other regional economies through its purchasing power. Additionally, it can be observed a centerperiphery pattern in the spatial concentration of the effects of the hypothetical extraction of any territory. From a policy point of view, the main findings reaffirm the role played by Bogotá in the polarization process observed in the regional economies in Colombia in the last years. Any policy action oriented to reduce these regional disparities should take into account that, given the structural interdependence among Colombian departments, new investment in the lagged regions would flow through Bogotá and the major regional economies.Input-output; extraction method; Colombia Classification JEL: R12; R15.