Analysis of Economic Potentials of Infrastructure Developments in and around Bhutan

Discussion Papers

No.702

by Satoru Kumagai, Ikumo Isono and Kenmei Tsubota

March 2018

ABSTRACT

This paper conducts a simulation analysis of a spatial economic model in Southern A sia, with a particular focus on Bhutan. It indicates the potential impacts of different i nfrastructure investments on regional economies in Bhutan and the neighboring countries. The results reveal that road infrastructure investments within Bhutan will li kely increase regional accessibility, reshape the monocentric structure of the economy, and induce migration, thereby increasing the real wage for most of B hutan’s regions. Furthermore, road infrastructure investments within India have s ome spillover effects on Bhutan, which can be magnified by further reduction in non-tariff barriers. The comparison of the different scenarios indicates that the combination of projects may generate synergy effects.

Keywords:  Simulation, new economic geography, Bhutan

JEL classification:  R12, R13, R42

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