Transportation, freight rates, and economic geography

Kristian Behrens () and Pierre Picard

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping man- ufactured goods, and freight rates are set to clear transport markets. Each carrier must commit to the maximum capacity for a round-trip and thus faces a logistics problem as there are opportunity costs of returning empty. These costs increase the freight rates charged to rms located in regions that are net exporters of manufactured goods. Since demand for transport services depends on the spatial distribution of economic activity, the concentration of production in one region raises freight rates to serve foreign markets from there, thus working against specialization and the agglomera- tion of rms. Consequently, a more even spatial distribution of rms and production prevails at equilibrium when freight rates are endogenously determined than when they are assumed to be exogenous as in the literature.

JEL-codes: F12 R12 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-geo, nep-int and nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (78)

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http://wwwfr.uni.lu/content/download/35481/427114/ ... omic%20geography.pdf (application/pdf)

Related works:
Journal Article: Transportation, freight rates, and economic geography (2011)
Working Paper: Transportation, freight rates, and economic geography (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:11-02

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