Who Wins, Who Loses? Understanding the Spatially Differentiated Effects of the Belt and Road Initiative

Abstract

This paper examines how cities and regions within countries are likely to adjust to trade openness and improved connectivity driven by large transport investments from China's Belt and Road Initiative. The paper presents a quantitative economic geography model alongside spatially detailed information on the location of people, economic activity, and transport costs to international gateways in Central Asia to identify which places are likely to gain and which places are likely to lose. The findings are that urban hubs near border crossings will disproportionately gain while farther out regions with little comparative advantage will be relative losers. Complementary investments in domestic transport networks and trade facilitation are complementary policies and can help in spatially spreading the benefits. However, barriers to domestic labor mobility exacerbate spatial inequalities whilst dampening overall welfare.

Common Transport Infrastructure: A Quantitative Model and Estimates from the Belt and Road Initiative

“…We now discuss the changes in real trade flows following the implementation of BRI projects. Using equations (18) and (19) we can derive information on which represents the changes in nominal value of trade flow (net of tariffs) from country n to country i in sector j. Next, we need to construct changes in real trade flows and deflate the change in nominal values with the change of the relevant price indices.…”

“…This effect is magnified when there are important complementarities between foreign and domestic inputs in production. Equilibrium analysis (Zhai, 2018; Maliszewska and van der Mensbrugghe, 2019), spatial effects (Bird et al, 2019;Lall and Lebrand, 2019), and debt sustainability (Bandiera and Tsiropoulos, 2019).…”

Moving Forward: Connectivity and Logistics to Sustain Bangladesh’s Success

“…It looks at how reductions in logistics costs affect the competitiveness of districts in the production of imports and exports (tradable goods). The model relies on work done on Argentina (Fajgelbaum and Redding 2018) and the Belt and Road Initiative in Central Asia (Lall and Lebrand 2019).…”

Enhancing Burkina Faso Regional Connectivity

“…The spatial general equilibrium model discussed here was developed and calibrated for Burkina Faso and its landlocked neighbor Niger to assess the impacts of transport interventions that reduce transport and trade costs along the corridor connecting Niamey to the port of Lomé via Burkina Faso's East region. The model relies on work done on Argentina (Fajgelbaum and Redding, 2014), the Belt and Road Initiative in Central Asia (Lall and Lebrand, 2019), and Bangladesh (Herrera Dappe and Lebrand, 2019). It has three building blocks: geography, economic activity, and workers.…”