A Reflection On The Effects Of Transport Costs Within The New Economic Geography

Olga Alonso-Villar

No 57, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: The purpose of this paper is to analyze, in the light of recent contributions of New Economic Geography models, the spatial consequences of transport cost reductions. So far, the role of transport costs have been only partially unveiled, since papers focused either on the Dixit-Stiglitz-Iceberg framework or on the alternative framework put forth by Ottaviano et al. (2002)—which departs from the former in preferences and transport modelling. This paper goes a step further, offering a comprehensive view that includes the two approaches, in contexts both of two and of more than two locations. As opposed to other revisions of the literature, which have focused mainly on the centripetal forces included in these models, we emphasize the role of dispersion forces. The study suggests that in a two-location setting the results seem quite robust against changes in transportation modelling, so that considering either multiplicative transport costs or additive the predictions are identical. However, when allowing for a multilocation setup, the analysis becomes more complex.

Keywords: agglomeration; dispersion; monopolistic competition; transport costs. (search for similar items in EconPapers)
JEL-codes: F12 R12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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