How density economies in international transportation link the internal geography of trading partners

Kristian Behrens, Carl Gaigne, Gianmarco Ottaviano and Jacques Thisse
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Kristian Behrens: CORE - UCL - Université Catholique de Louvain = Catholic University of Louvain

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Abstract: We present a two-country four-region model of new economic geography that partly endogenizes the level of trade costs. Contrary to the existing literature, we assume that international unit shipping costs depend on the volume of trade, due to the presence of density (dis)economies. We show that agglomeration (or dispersion) within a country may be induced by the geography of the other country through the channel of trade. Furthermore, whereas density economies may give rise to multiple equilibria and catastrophic agglomeration in both countries, density diseconomies lead to a smooth agglomeration process exhibiting a unique stable equilibrium.

Keywords: DENSITY (DIS)ECONOMIES; ECONOMIC GEOGRAPHY; TRADE COST; TRANSPORTATION; TRANSPORT (search for similar items in EconPapers)
Date: 2006
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Published in Journal of Urban Economics, 2006, 60 (2), pp.248-263. ⟨10.1016/j.jue.2006.02.007⟩

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Journal Article: How density economies in international transportation link the internal geography of trading partners (2006)
Working Paper: How density economies in international transportation link the internal geography of trading partners (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02665142

DOI: 10.1016/j.jue.2006.02.007

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