Evaluating rural roads programmes: A general equilibrium analysis

The structure employed is a small open economy, with one city and rural hinterland, two traded goods, transport sector, specific factors, mobile labour. A socially profitable programme will promote not only internal, but also external trade. Theory numerical examples indicate that aggregate social profitability its distribution between town country are rather insensitive to the city’s location whether: (i) it financed by tariff or an excise on importable; (ii) transportation wage regulated; (iii), when agents risk neutral, economy’s barter terms of trade fluctuate stochastically.