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Rising Trade Costs? Agglomeration and Trade with Endogenous Transaction Costs

  • Gilles Duranton
  • Michael Storper

While transport costs have fallen, the empirical evidence also points at rising total trade costs. In a model of industry location with endogenous transaction costs, we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0683.

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Date of creation: Apr 2005
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Handle: RePEc:cep:cepdps:dp0683
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1846, Harvard - Institute of Economic Research.
  2. Anne-Célia Disdier & Keith Head, 2004. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," Development Working Papers 186, Centro Studi Luca d\'Agliano, University of Milano.
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  4. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, March.
  5. Michael Storper & Yun-chung Chen, 2002. "Trade and the location of industries in the OECD and European Union," Journal of Economic Geography, Oxford University Press, vol. 2(1), pages 73-107, January.
  6. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing in a Global Economy," Working Papers 149, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  7. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
  8. Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
  9. Berthelon, Matias & Freund, Caroline, 2004. "On the conservation of distance in international trade," Policy Research Working Paper Series 3293, The World Bank.
  10. Edward E. Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," NBER Working Papers 8450, National Bureau of Economic Research, Inc.
  11. Thierry Mayer & Keith Head, 2003. "The Empirics of Agglomeration and Trade," Working Papers 2003-15, CEPII research center.
  12. Gertler, Meric S., 2004. "Manufacturing Culture: The Institutional Geography of Industrial Practice," OUP Catalogue, Oxford University Press, number 9780198233824, March.
  13. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  14. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  15. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  16. Matouschek, Niko & Robert-Nicoud, Frederic, 2005. "The role of human capital investments in the location decision of firms," Regional Science and Urban Economics, Elsevier, vol. 35(5), pages 570-583, September.
  17. James Harrigan & Anthony J. Venables, 2004. "Timeliness, Trade and Agglomeration," NBER Working Papers 10404, National Bureau of Economic Research, Inc.
  18. Rotemberg, Julio J. & Saloner, Garth, 2000. "Competition and human capital accumulation: a theory of interregional specialization and trade," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 373-404, July.
  19. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
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  21. repec:spo:wpecon:info:hdl:2441/10191 is not listed on IDEAS
  22. K.H. Midelfart & H.G. Overman & S.J. Redding & A.J. Venables, 2000. "The location of European industry," European Economy - Economic Papers 142, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  23. 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.
  24. Pierre-Philippe Combes & Miren Lafourcade, 2005. "Transport costs: measures, determinants, and regional policy implications for France," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 319-349, June.
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