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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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File URL: http://eprints.lse.ac.uk/19898/
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 19898.

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Length: 26 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:ehl:lserod:19898
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Web page: http://www.lse.ac.uk/

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  1. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, March.
  2. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
  3. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  4. Oliver Hart & John Moore, 1998. "Foundations of incomplete contracts," LSE Research Online Documents on Economics 19354, London School of Economics and Political Science, LSE Library.
  5. Edward L. Glaeser & Janet E. Kohlhase, 2003. "Cities, Regions and the Decline of Transport Costs," Harvard Institute of Economic Research Working Papers 2014, Harvard - Institute of Economic Research.
  6. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  7. Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  8. 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.
  9. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  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. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing in a Global Economy," NBER Working Papers 8728, National Bureau of Economic Research, Inc.
  12. Berthelon, Matias & Freund, Caroline, 2008. "On the conservation of distance in international trade," Journal of International Economics, Elsevier, vol. 75(2), pages 310-320, July.
  13. Julio J. Rotemberg & Garth Saloner, 1990. "Competition and Human Capital Accumulation: A Theory of Interregional Specialization and Trade," NBER Working Papers 3228, National Bureau of Economic Research, Inc.
  14. 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.
  15. James Harrigan & Anthony J. Venables, 2004. "Timeliness, Trade and Agglomeration," NBER Working Papers 10404, National Bureau of Economic Research, Inc.
  16. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
  17. 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.
  18. 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.
  19. Keith Head & Thierry Mayer, 2004. "The Empirics of Agglomeration and Trade," Sciences Po publications info:hdl:2441/10191, Sciences Po.
  20. 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.
  21. repec:spo:wpecon:info:hdl:2441/10191 is not listed on IDEAS
  22. 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.
  23. Gertler, Meric S., 2004. "Manufacturing Culture: The Institutional Geography of Industrial Practice," OUP Catalogue, Oxford University Press, number 9780198233824, March.
  24. 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.
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