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Transport costs in new economic geography models: A more realistic approach

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  • Miguel Puente‐Ajovín
  • Fernando Sanz‐Gracia

Abstract

This paper proposes an alternative method to the iceberg approach for modeling transport costs. Instead of part of the good evaporating in transit, we take as our basis the idea that certain workers in companies are in productive occupations in the strict sense, and others work in transport. This simple change is found to be capable of overcoming most of the criticisms associated with the iceberg approach.

Suggested Citation

  • Miguel Puente‐Ajovín & Fernando Sanz‐Gracia, 2021. "Transport costs in new economic geography models: A more realistic approach," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(3), pages 221-233, September.
    • Handle: RePEc:bla:ijethy:v:17:y:2021:i:3:p:221-233
    DOI: 10.1111/ijet.12229
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    References listed on IDEAS

    as
    1. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1339-1398, Elsevier.
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    4. Philip McCann, 2005. "Transport costs and new economic geography," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 305-318, June.
    5. Janic, Milan, 2008. "An assessment of the performance of the European long intermodal freight trains (LIFTS)," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(10), pages 1326-1339, December.
    6. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
    7. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, April.
    8. Theodore Papageorgiou & Myrto Kalouptsidi & Giulia Brancaccio, 2017. "Geography, Search Frictions and Trade Costs," 2017 Meeting Papers 1105, Society for Economic Dynamics.
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