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The
impact of transport infrastructure on location choice |
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Jen-Te Yao («À¤¯¼w) |
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Working Paper |
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Jen-Te Yao («À¤¯¼w) |
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This paper presents a variant of the Hotelling duopoly model (1929) in order to analyze the
impact of a structural change in transport infrastructure on the location of
firms. An improvement in a market¡¦s transport infrastructure leads firms to
re-locate their plants. The degree of infrastructure improvement includes
both travel efficiency and communication efficiency due to spillover
externalities. A tunnel-crossing cost function is assumed to be quadratic in
the effective distance. The result shows that under equilibrium firms are dispersed
in their location, with the degree of dispersion depending on efficiently
passing through the tunnel. A policy implication is that in addition to
regulating a firm¡¦s location by using a fiscal regime, the authorities are
suggested to improve transportation efficiency as it can improve a country¡¦s
welfare. |
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