Abstract
This study formulated a general equilibrium model of a developing country where the major exported goods are produced by foreign-capital firms. With the model, this study analyzed the impacts of transportation infrastructure on the industrial structure of the developing country. The country is an open-economy with two sectors. The first is the sector of traded goods owned by foreign capital. The second is the sector of non-traded goods owned by domestic capital. The analysis showed that transportation infrastructure to reduce the trade cost with the world market will expand the sector of traded goods while reducing the sector of non-traded goods. This results in the reduction of the number of domestic firms and entrepreneurs. On the other hand, the transportation infrastructure to reduce the trade cost within the country will expand the sector of non-traded goods. Based on the result of the analysis, this study discussed its policy implication on the long-run growth of the developing country.
