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Rising trade costs? Agglomeration and trade with endogenous transaction costs

  • Gilles Duranton
  • Michael Storper

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.

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File URL: http://economics.ca/cgi/xms?jab=v41n1/CJEv41n1p0292.pdf
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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 41 (2008)
Issue (Month): 1 (February)
Pages: 292-319

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Handle: RePEc:cje:issued:v:41:y:2008:i:1:p:292-319
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  1. Miren Lafourcade & Pierre-Philippe Combes, 2005. "Transport Costs: Measures, Determinants and Regional Policy Implications for France," Post-Print halshs-00754078, HAL.
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  7. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  8. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  9. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
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  19. 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.
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  26. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
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