The effects of transport costs within the new economic geography

Olga Alonso-Villar

No 502, Working Papers from Universidade de Vigo, Departamento de Economía Aplicada

Abstract: In the last few years a great number of works, involved in what has been called the New Economic Geography, have been focused on explaining the causes of agglomeration in a framework of monopolistic competition à la Dixit-Stiglitz. The purpose of this paper is to analyze, in the light of these theories, the spatial consequences of reductions in transport costs between locations (cities, regions and countries), showing the key assumptions which explain the differences between the results obtained in some of these works. The results show that the spatial pattern of production after these reductions strongly depend on the population’s mobility/immobility, on the dispersion force considered in the model and also on trade cost modeling.

Date: 2005-02
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