Trade spillover effects of transport infrastructure investments: a structural gravity analysis for EU regions

Abstract

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A structural gravity model is used to estimate the regional trade and welfare effects of the reduction in transport costs between and within European Union regions induced by European Union Cohesion Policy road infrastructure investment. The results imply that, in targeted regions, the policy increases interregional real exports by 0.03% and real gross domestic product (GDP) by 0.15% on average. The gains in real GDP are the highest in the regions receiving most funds. Although the policy always leads to more goods being shipped, for some regions it implies less trade external to the region and more trade within.