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Timeliness, Trade and Agglomeration

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  • James Harrigan
  • Anthony J. Venables

Abstract

An important element of the cost of distance is time taken in delivering final and intermediategoods. We argue that time costs are qualitatively different from direct monetary costs such asfreight charges. The difference arises because of uncertainty. Unsynchronised deliveries candisrupt production, and delivery time can force producers to order components beforedemand and cost uncertainties are resolved. Using several related models we show that thiscan cause clustering of component production. If final assembly takes place in two locationsand component production has increasing returns to scale, then component production willtend to cluster around just one of the assembly plants.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0616.

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Date of creation: Feb 2004
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Handle: RePEc:cep:cepdps:dp0616

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Just- in-time; clustering; location; trade.;

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References

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  1. Anthony J. Venables, 2001. "Geography and International Inequalities: the Impact of New Technologies," CEP Discussion Papers, Centre for Economic Performance, LSE dp0507, Centre for Economic Performance, LSE.
  2. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  3. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 551-75, August.
  4. Michael Storper & Anthony J. Venables, 2003. "Buzz: Face-to-Face Contact and the Urban Economy," CEP Discussion Papers, Centre for Economic Performance, LSE dp0598, Centre for Economic Performance, LSE.
  5. Carolyn Evans & James Harrigan, 2003. "Distance, time, and specialization," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 766, Board of Governors of the Federal Reserve System (U.S.).
  6. Thomas H. Klier, 1999. "Agglomeration in the U.S. auto supplier industry," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q I, pages 18-34.
  7. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, Elsevier, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  8. Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies, Palgrave Macmillan, vol. 32(4), pages 641-665, December.
  9. David L. Hummels & Georg Schaur, 2013. "Time as a Trade Barrier," American Economic Review, American Economic Association, American Economic Association, vol. 103(7), pages 2935-59, December.
  10. Cremer, Jacques, 1995. "Towards an economic theory of incentives in just-in-time manufacturing," European Economic Review, Elsevier, Elsevier, vol. 39(3-4), pages 432-439, April.
  11. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(5), pages 709-24, October.
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Cited by:
  1. Liu, Xiaoyun & Xin, Xian, 2011. "Transportation uncertainty and international trade," Transport Policy, Elsevier, vol. 18(1), pages 156-162, January.
  2. Jang Ping Thia, 2008. "Why Capital does not Migrate to the South: A New Economic Geography Perspective," CEP Discussion Papers, Centre for Economic Performance, LSE dp0895, Centre for Economic Performance, LSE.
  3. Gilles Duranton & Michael Storper, 2005. "Rising Trade Costs? Agglomeration and Trade with Endogenous Transaction Costs," CEP Discussion Papers, Centre for Economic Performance, LSE dp0683, Centre for Economic Performance, LSE.
  4. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(3), pages 131-154, Summer.
  5. Harrigan, James, 2010. "Airplanes and comparative advantage," Journal of International Economics, Elsevier, Elsevier, vol. 82(2), pages 181-194, November.
  6. John Whalley & Xian Xin, 2007. "Regionalization, Changes in Home Bias, and the Growth of World Trade," NBER Working Papers 13023, National Bureau of Economic Research, Inc.

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