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The effects of transport costs revisited

Olga Alonso Villar
Authors registered in the RePEc Author Service: Olga Alonso-Villar

No 407, Working Papers from Universidade de Vigo, Departamento de Economía Aplicada

Abstract: The aim of this paper is to study the location decisions of upstream and downstream industries when transport costs in each sector are analyzed separately. By using a new economic geography model built on Venables (1996), it will be shown that the effects of cost reductions in transporting final goods are different from those in intermediate goods. Our analysis suggests that regional convergence is more the consequence of improvements in transportation between upstream and downstream firms than those between firms and consumers. This will help us to better understand the forces driving this kind of model while giving an additional explanation to the differences between Krugman’s (1991) results and those of Venables (1996).

Keywords: location of firms; monopolistic competition; input-output linkages; transport costs (search for similar items in EconPapers)
JEL-codes: F12 R12 (search for similar items in EconPapers)
Date: 2004-07
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