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Public infrastructure for production and international trade in a small open economy: a dynamic analysis

Author

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  • Akihiko Yanase

    (Nagoya University)

  • Makoto Tawada

    (Aichi Gakuin University)

Abstract

This paper develops a dynamic trade model with a stock of public infrastructure, which has a property of “unpaid factor of production”. We show that a country with a smaller (larger) labor endowment tends to become an exporter of a good whose productivity is more (less) sensitive to the stock of public infrastructure. We also show that after the opening of trade, the labor-scarce country becomes unambiguously better off but the labor-abundant country may become worse off. Overall, these results contrasts with those obtained in the case of public intermediate goods with a “creation of atmosphere” property.

Suggested Citation

  • Akihiko Yanase & Makoto Tawada, 2017. "Public infrastructure for production and international trade in a small open economy: a dynamic analysis," Journal of Economics, Springer, vol. 121(1), pages 51-73, May.
    • Handle: RePEc:kap:jeczfn:v:121:y:2017:i:1:d:10.1007_s00712-016-0519-z
    DOI: 10.1007/s00712-016-0519-z
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Akihiko Yanase & Ngo Van Long & Ngo Van Long, 2020. "Trade Costs and Strategic Investment in Infrastructure in a Dynamic Global Economy with Symmetric Countries," CESifo Working Paper Series 8707, CESifo.
    2. Rimvie Enoc Kabore, 2021. "Manufacturing export performance and public capital: an analysis by country technology position," Working Papers hal-03359665, HAL.
    3. Makoto Tawada & Akihiko Yanase, 2021. "Production possibilities and trade in a one-primary factor economy with public infrastructure," Asia-Pacific Journal of Regional Science, Springer, vol. 5(1), pages 169-189, February.
    4. Akihiko Yanase & Ngo Van Long, 2020. "Strategic Investment in an International Infrastructure Capital: Nonlinear Equilibrium Paths in a Dynamic Game between Two Symmetric Countries," Mathematics, MDPI, vol. 9(1), pages 1-24, December.
    5. Ivan A. Kapitonov, 2020. "Transformation of social environment in the application of alternative energy sources," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(8), pages 7683-7700, December.
    6. Akihiko Yanase & Makoto Tawada, 2020. "Public infrastructure and trade in a dynamic two‐country model," Review of International Economics, Wiley Blackwell, vol. 28(2), pages 447-465, May.

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    More about this item

    Keywords

    Semi-public intermediate good; Dynamic Lindahl pricing; Trade patterns; Long-run production possibility frontier; Gains or losses from trade;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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