Essays on Economic Policy (ESPE in Spanish) - Handling Market Imperfections in a Spatial Economy: Some Experimental Results II
En la revista Ensayos sobre Política Económica (ESPE) divulgamos los resultados y las propuestas de política que surgen de investigaciones académicas realizadas en el Banco de la República. Cuando nos lea, tenga siempre presente que el contenido de nuestros artículos, así como los análisis y conclusiones que de ellos se derivan, son exclusiva responsabilidad de sus autores. El material divulgado en nuestra revista ESPE no compromete ni representa la opinión del Banco de la República ni la de su Junta Directiva.
Abstract
The Brazilian economy, with significant differences in the distribution of economic activity across regions, presents a challenge to models that adopt a perfectly competitive market structure. This paper employs an interregional CGE model of the Brazilian economy to explore the long-run impacts of positing changes in transportation structure and scale economies on regional and national welfare. In particular, the transportation cost structure is modeled explicitly as a margin rather than in an iceberg form; scale economies are addressed as a way to mimic the imperfectly competitive structure of the Brazilian economy and to capture some of the potential impacts of core-periphery relationships in production structure. This paper complements a previous study by Haddad and Hewings (2005) that focused on the short-run implications of similar experiments.
