Transport Costs and Rural Development
Innovations that reduce costs of transport from rural locations may also reduce transport costs to rural areas. As transport costs fall, producers can afford to concentrate and achieve economies of scale. This paper explains an initially negative, but ultimately positive, relationship between reductions in transport costs and rural development. A two-region general equilibrium model with firm and worker spatial mobility highlights the firm and household location implications of costly transport service use by both industry and agriculture in the context of scale economies and product differentiation. The computable general equilibrium model is initialized and verified with a bi-regional Social Accounting Matrix and then used for simulations. Changes in relative transport costs are shown to affect relative regional wage rates, thus also determining the location of 'production-cost-oriented' firms.
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|Date of creation:||01 Jan 1998|
|Publication status:||Published in Journal of Regional Science 1998, vol. 38 no. 2, pp. 293-312|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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3275, National Bureau of Economic Research, Inc.
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- Kilkenny, Maureen, 1993. "Rural vs. Urban Effects of Terminating Farm Subsidies," Staff General Research Papers Archive 11121, Iowa State University, Department of Economics.
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