The social profitability of rural roads in a small open economy: Do urban agglomeration economies matter? |
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Authors: | Clive Bell |
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Affiliation: | Universität Heidelberg, Voßstraße 2 Heidelberg, D-69115 Germany |
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Abstract: | The effects of a rural roads programme depend on labour mobility, how the programme is financed, and agglomeration economies. If financed by a rural poll tax and cross-price effects and agglomeration economies are sufficiently small, the wage will rise, with some return migration. Taxes on trade act as countervailing distortions, yielding urban households some relief. Rural-urban commuting promotes the exploitation of agglomeration economies; taxes on international trade are then inferior to a poll tax. The change in the value, at producer prices, of the rural sector's net supply vector can be a poor measure of the programme's social profitability. |
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Keywords: | rural roads social profitability transport costs agglomeration economies small open economy |
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