The cost of transportation as a barrier to trade in economic integration: the case of northeast

Abstract

The Brazilian integration strategy has been focused on agreements based upon North-South and South-South negotiations. However, this kind of negotiations face serious troubles to be done. Consequently, the option of the internal economic integration might be more viable in terms of social welfare gains and promotion of regional equity. To do this, an spatial applied general equilibrium model was elaborated for analyzing economic integration policies in the country. This model incorporates explicitly transport cost as a trade barrier. The model is specified for five Brazilian macro-regions and five external regions (Nafta, Asia, European Union, Alcsa and rest of the World). Several economic integration options were simulated in order to analyze what are the best ones for the country and for Nordeste, appraised in terms of economic efficiency and regional equity.economic integration, spatial applied general equilibrium model, transport costs, Nordeste