Research Item (1)
The wider impacts of transport infrastructure investments are pecuniary externalities that are commonly alleged to be positive. At least when inferred from partial equilibrium analysis, this can be viewed as reasonable. Though, for an economy with limited resources, it might be reasonable to presume that positive wider impacts are redistributive effects rather than self-contained benefits. If they are, what is the sign of the net wider impact? To study this sign and its determinants, I set up various general equilibrium models of spatial economies in which the costs of transportation are brought down by means of some tax-funded scheme. Applying two separate classes of models, I study the wider impacts both from imperfectly competitive markets in the wider economy and from the agglomeration of economic activity. The former comprehends monopolistic, duopolistic and monopolistically competitive markets, including one with endogenous firm entry. The latter is a New Economic Geography model that is devised as to allow for a welfare analysis. The signs of the wider impacts are found to be highly ambiguous.