Inland Navigation and International Trade Development

Structural Model

The research framework of this paper is based on the dynamic spatial structure model developed by Desmet (2018). The model combines economic development with spatial geography and examines the impact of population clustering, business innovation, and infrastructure development conditions on the development of international trade. The model is based on a dynamic system and has a higher degree of flexibility relative to Allen’s (2014) static spatial economic model. This paper extends the model in two ways. First, we add capital as a factor of production to the firm’s production function and create an expression for the firm’s profit maximisation problem that includes capital. Secondly, the paper considers the impact of transport infrastructure development on the trade balance and general equilibrium.

Empirical Analysis

In this paper, we select provincial panel data for a 20-year period from 1998-2017 and build a SCM and DID model to analyse the impact of the quasi-natural experiment of Three Gorges access on trade development. We also use prefecture-level city panel data from 2000-2017 to robustly test the findings.