What are Falling Transport Costs doing to Spatial Concentration Across US Counties?
Theory is divided on whether falling transport costs lead to more or less spatial concentration of economic activity. Using US county-level data we find that aggregate employment became more concentrated between 1972-92. This aggregate picture hides important differences between sectors though. Whereas non-service sectors have been spreading out, service sectors have become increasingly concentrated by absorbing jobs from nearby areas. This cross-sectional variation lends support to Krugman and Venables (1995), who suggest that falling transport costs initially lead to more concentration, and later on to more dispersion.
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