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Rising trade costs? Agglomeration and trade with endogenous transaction costs

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  • Gilles Duranton
  • Michael Storper

Abstract

costs. In a model of industry location with endogenous transaction costs that seeks to replicate features from the machinery industry, we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade. The subtle relationship between (endogenous) transport costs and the sensitivity of trade to distance is also explored.

Suggested Citation

  • Gilles Duranton & Michael Storper, 2008. "Rising trade costs? Agglomeration and trade with endogenous transaction costs," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 292-319, February.
  • Handle: RePEc:cje:issued:v:41:y:2008:i:1:p:292-319
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    Cited by:

    1. Robert-Nicoud, Frédéric, 2006. "Off-shoring of business services and de-industrialization: threat or opportunity - and for whom?," LSE Research Online Documents on Economics 19847, London School of Economics and Political Science, LSE Library.
    2. Keith Head & Thierry Mayer, 2013. "What separates us? Sources of resistance to globalization," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1196-1231, November.
    3. Noblet, Sandrine & Belgodere, Antoine, 2010. "Coordination cost and the distance puzzle," MPRA Paper 27502, University Library of Munich, Germany.
    4. Fabien Candau & Florent Deisting & Julie Schlick, 2017. "How Income and Crowding Effects Influence the World Market for French Wines," The World Economy, Wiley Blackwell, vol. 40(5), pages 963-977, May.
    5. Stefan Gruber & Luigi Marattin, 2007. "No Taxation without Infrastructure," Working Paper series 11_07, Rimini Centre for Economic Analysis.
    6. Redding, Stephen, 2009. "Economic geography: a review of the theoretical and empirical literature," LSE Research Online Documents on Economics 25500, London School of Economics and Political Science, LSE Library.
    7. repec:rim:rimwps:11-07 is not listed on IDEAS
    8. Stefan Gruber & Luigi Marattin, 2010. "Taxation, infrastructure and endogenous trade costs in new economic geography," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 203-222, March.
    9. Kondylis, Florence, 2005. "Agricultural returns and conflict: quasi-experimental evidence from a policy intervention programme in Rwanda," LSE Research Online Documents on Economics 19878, London School of Economics and Political Science, LSE Library.
    10. Álvarez, Inmaculada C. & Barbero, Javier & Rodríguez-Pose, Andrés & Zofío, José L., 2018. "Does Institutional Quality Matter for Trade? Institutional Conditions in a Sectoral Trade Framework," World Development, Elsevier, vol. 103(C), pages 72-87.
    11. Mario Larch & Pehr-Johan Norbäck & Steffen Sirries & Dieter M. Urban, 2016. "Heterogeneous Firms, Globalisation and the Distance Puzzle," The World Economy, Wiley Blackwell, vol. 39(9), pages 1307-1338, September.
    12. Olaf Jonkeren & Erhan Demirel & Jos van Ommeren & Piet Rietveld, 2011. "Endogenous transport prices and trade imbalances," Journal of Economic Geography, Oxford University Press, vol. 11(3), pages 509-527, May.
    13. Grimes, Arthur & Le Vaillant, Jason & McCann, Philip, 2011. "Auckland's Knowledge Economy: Australasian and European Comparisons," Occasional Papers 11/2, Ministry of Economic Development, New Zealand.
    14. Allen J. Scott & Michael Storper, 2015. "The Nature of Cities: The Scope and Limits of Urban Theory," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 39(1), pages 1-15, January.
    15. Elisaveta Archanskaia & Guillaume Daudin, 2012. "Heterogeneity and the Distance Puzzle," Documents de Travail de l'OFCE 2012-17, Observatoire Francais des Conjonctures Economiques (OFCE).
    16. Guillaume Daudin & Elizaveta Archanskaia, 2012. "Heterogeneity and distance puzzle," Working Papers hal-01073683, HAL.
    17. Steven Bond-Smith, 2012. "A Regional Model of Endogenous Growth with Creative Destruction," Working Papers in Economics 12/02, University of Waikato.
    18. Michael Storper, 2010. "Agglomeration, Trade, And Spatial Development: Bringing Dynamics Back In," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 313-342.
    19. Masahisa Fujita & Tomoya Mori, 2005. "Frontiers of the New Economic Geography-super-," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 377-405, August.
    20. Meng Wang & Yaoqiu Kuang & Ningsheng Huang, 2015. "Sustainable Urban External Service Function Development for Building the International Megalopolis in the Pearl River Delta, China," Sustainability, MDPI, Open Access Journal, vol. 7(10), pages 1-26, September.
    21. Cristea, Anca D., 2011. "Buyer-seller relationships in international trade: Evidence from U.S. States' exports and business-class travel," Journal of International Economics, Elsevier, vol. 84(2), pages 207-220, July.
    22. repec:spr:manint:v:52:y:2012:i:6:d:10.1007_s11575-012-0142-3 is not listed on IDEAS
    23. Sandrine Noblet & Antoine Belgodere, 2016. "Coordination Costs and the Geography of Production," Spatial Economic Analysis, Taylor & Francis Journals, vol. 11(4), pages 392-412, October.
    24. Sun, Churen & Yu, Zhihao & Zhang, Tao, 2012. "Agglomeration and Trade with Heterogeneous Firms," MPRA Paper 49001, University Library of Munich, Germany, revised 17 Aug 2013.
    25. Churen Sun & Zhihao Yu & Tao Zhang, 2012. "Agglomeration, Productivity, and Firms¡® Exports: Evidence from Chinese Firm-level Data," ERSA conference papers ersa12p882, European Regional Science Association.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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