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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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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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