Industrial Reorganisation Benefits Revisited
Journal of Transport Economics and Policy, 2014, vol. 48, issue 1, 53-63
Transport improvements can give rise to industrial reorganisation benefits. When a monopoly owns all firms and bears the transport costs, these benefits are all captured in a transport cost-benefit analysis (CBA). In the free market case, industrial reorganisation benefits are proportionally larger and can no longer be captured by a transport CBA. We show that the free market has too many firms and too little transport, and is economically inefficient. Preferably, we should eliminate the inefficiency rather than counteract it with transport infrastructure building. A uniform price of the commodity at all locations might do the trick. © 2014 LSE and the University of Bath
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