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Decomposing generalized transport costs using index numbers: A geographical analysis of economic and infrastructure fundamentals

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  • Zofío, José Luis

    ()
    (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

  • Condeço-Melhorado, Ana M.

    (Departamento de Geografía Humana, Universidad Complutense de Madrid)

  • Maroto-Sánchez, Andrés

    ()
    (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

  • Gutiérrez, Javier

    (Departamento de Geografía Humana, Universidad Complutense de Madrid)

Abstract

We use the economic theory approach to index numbers in order to improve the existing definitions and decompositions of generalized transport costs (GTCs), and thus to obtain a better understanding of their economic and infrastructure determinants. Using this approach we accurately measure the contribution made to reducing GTCs by the variation in operating costs and accessibility variables, and discuss to what extent transportation policy has been successful in reducing GTCs in terms of market competition and infrastructure investments. To implement the optimizing behaviour of transportation firms when choosing minimum cost itineraries, we compile a new economic database on road freight transportation at a highly detailed provincial level, which is then embedded into a GIS to show the digitalized road networks corresponding to five-year intervals between 1980 and 2007. Average GTCs weighted by trade flows have decreased by -16.3% in Spain, with infrastructure policy leading the way in providing notable accessibility improvements in terms of lower times and distances. The contribution of infrastructure is double that of economic cost, whose trends are mainly driven by technological and market determinants rather than by specific competition and regulatory policies promoted by the administrations. We find large territorial disparities in GTC levels and variations, but also significant clusters where the market and network effects on GTC reduction show relevant and diverse degrees of spatial association. We finally conclude that after three decades of active transportation policy aimed mainly at intensifying investment in road infrastructure, there has been a significant increase in territorial cohesion in terms of GTCs and their components.

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Paper provided by Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History) in its series Working Papers in Economic Theory with number 2011/06.

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Length: 39 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:uam:wpaper:201106

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Keywords: Generalized transport costs; Index number theory; Infrastructure; GIS; Territorial cohesion.;

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  1. Gilles Duranton & Peter Morrow & Matthew Turner, 2013. "Roads and Trade: Evidence from the U.S," Working Papers, University of Toronto, Department of Economics tecipa-479, University of Toronto, Department of Economics.
  2. J.A. Duro, 2004. "Regional Income Inequalities in Europe: An Updated Measurement and Some Decomposition Results," Working Papers wpdea0411, Department of Applied Economics at Universitat Autonoma of Barcelona.
  3. Pierre-Philippe Combes & Miren Lafourcade, 2005. "Transport costs: measures, determinants, and regional policy implications for France," Journal of Economic Geography, Oxford University Press, Oxford University Press, vol. 5(3), pages 319-349, June.
  4. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Papers in Regional Science, Springer, Springer, vol. 83(1), pages 197-228, October.
  5. David Hummels & Volodymyr Lugovskyy & Alexandre Skiba, 2007. "The Trade Reducing Effects of Market Power in International Shipping," NBER Working Papers 12914, National Bureau of Economic Research, Inc.
  6. Russell Hillberry & David Hummels, 2005. "Trade Responses to Geographic Frictions: A Decomposition Using Micro-Data," NBER Working Papers 11339, National Bureau of Economic Research, Inc.
  7. Ivaldi, Marc & McCullough, Gerard, 2007. "Railroad Pricing and Revenue-to-Cost Margins in the Post-Staggers Era," Research in Transportation Economics, Elsevier, Elsevier, vol. 20(1), pages 153-178, January.
  8. Fisher,Franklin M. & Shell,Karl, 1998. "Economic Analysis of Production Price Indexes," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521556231.
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