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Journal of Economic Integration 2007 December;22(4) :723-747.
Trade, Infrastructure, and Roadways in Europe and Central Asia: New Empirical Evidence
Ben Shepherd and 
John S. Wilson 
The World Bank
Copyright ©2007 Journal of Economic Integration

Infrastructure quality is a crucial determinant of trade. To assess the importance of regional infrastructure externalities, we use detailed overland transit information from an original road network database. Gravity model simulations suggest that an ambitious but feasible road upgrade could increase trade by 50% over baseline, exceeding the expected gains from tariff reductions or trade facilitation programs of comparable scope. Cross-country spillovers due to overland transit are very large: total intraregional trade could be increased by 30% by upgrading roads in just three countries—Albania, Hungary and Romania. These results bolster the case for regional coordination of infrastructure investments.

JEL classification: F13, F15, H54

Keywords: International Trade | Europe and Central Asia | Road Transport | Trade Facilitation | Gravity Model
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