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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. Michael Storper & Anthony J. Venables, 2004. "Buzz: face-to-face contact and the urban economy," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 351-370, August.
  2. 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.
  3. James Harrigan & Carolyn Evans, 2004. "Distance, Time and Specialization," Econometric Society 2004 North American Winter Meetings 640, Econometric Society.
  4. 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.
  5. David L. Hummels & Georg Schaur, 2013. "Time as a Trade Barrier," American Economic Review, American Economic Association, vol. 103(7), pages 2935-59, December.
  6. Cremer, Jacques, 1995. "Towards an economic theory of incentives in just-in-time manufacturing," European Economic Review, Elsevier, vol. 39(3-4), pages 432-439, April.
  7. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(5), pages 709-24, October.
  8. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  9. Thomas H. Klier, 1999. "Agglomeration in the U.S. auto supplier industry," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 18-34.
  10. Anthony Venables, 2001. "Geography and International Inequalities: The Impact of New Technologies," Journal of Industry, Competition and Trade, Springer, vol. 1(2), pages 135-159, June.
  11. 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.
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Citations

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Cited by:
  1. James Harrigan, 2005. "Airplanes and Comparative Advantage," NBER Working Papers 11688, National Bureau of Economic Research, Inc.
  2. Gilles Duranton & Michael Storper, 2005. "Rising trade costs?: agglomeration and trade with endogenous transaction costs," LSE Research Online Documents on Economics 19898, London School of Economics and Political Science, LSE Library.
  3. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
  4. Liu, Xiaoyun & Xin, Xian, 2011. "Transportation uncertainty and international trade," Transport Policy, Elsevier, vol. 18(1), pages 156-162, January.
  5. Jang Ping Thia, 2008. "Why Capital does not Migrate to the South: A New Economic Geography Perspective," CEP Discussion Papers dp0895, Centre for Economic Performance, LSE.
  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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