Transport Costs and Rural Development
AbstractInnovations that reduce costs of transport from rural locations may also reduce transport costs to rural areas. As transport costs fall, producers can afford to concentrate and achieve economies of scale. This paper explains an initially negative, but ultimately positive, relationship between reductions in transport costs and rural development. A two-region general equilibrium model with firm and worker spatial mobility highlights the firm and household location implications of costly transport service use by both industry and agriculture in the context of scale economies and product differentiation. The computable general equilibrium model is initialized and verified with a bi-regional Social Accounting Matrix and then used for simulations. Changes in relative transport costs are shown to affect relative regional wage rates, thus also determining the location of 'production-cost-oriented' firms.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1185.
Date of creation: 01 Jan 1998
Date of revision:
Publication status: Published in Journal of Regional Science 1998, vol. 38 no. 2, pp. 293-312
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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Other versions of this item:
- Maureen Kilkenny, 1995. "Transport Costs and Rural Development," Food and Agricultural Policy Research Institute (FAPRI) Publications 95-wp133, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
- Kilkenny, Maureen, 2003. "Transport Costs and Rural Development," Staff General Research Papers 10309, Iowa State University, Department of Economics.
- Maureen Kilkenny, 1995. "Transport Costs and Rural Development," Center for Agricultural and Rural Development (CARD) Publications 95-wp133, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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