| Abstract: |
This paper investigates the trade effects of transportation infrastructure
reforms funded by the Asian Development Bank (ADB) in the Central Asia
Regional Economic Cooperation (CAREC) program. To do this, we applied a
combination of geographic information systems (GIS), econometric, and
computable general equilibrium (CGE) analyses. Using GIS analysis, we compute
the reduction in bilateral transport time and potential substitution across
transportation modes induced by ADB-funded transportation reforms in the CAREC
program. Then, using econometric analyses, we examine the direct impacts of
transport time on the extensive and intensive margins of trade. We use the
average geographical features of trade partners as the instruments of
bilateral transport time to address the endogeneity between trade and
infrastructure. Finally, implementing the partial equilibrium impacts of
transport time reductions on trade in a firm-heterogeneity CGE model in the
Global Trade Analysis Project (GTAP), we investigate the additional endogenous
effects of transport time on trade. Combining the estimates of bilateral
transport time reductions from the GIS analysis and the estimates of extensive
and intensive margins of the trade from the two-part model, we find that the
ADB transportation reforms in CAREC countries increase the trade values for
existing exporters by 3.31% and trade participation by 1.21% on average. Using
the CGE analysis, we find that trade values for CAREC countries increase by
2.04% to 8.72%, on average, due to additional endogenous effects on trade. We
also find a positive change in total welfare for CAREC countries. |