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Transport Costs and Rural Development

  • Kilkenny, Maureen

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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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1185.

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Date of creation: 01 Jan 1998
Date of revision:
Publication status: Published in Journal of Regional Science 1998, vol. 38 no. 2, pp. 293-312
Handle: RePEc:isu:genres:1185
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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  1. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  2. Uwe Walz, 1996. "Long-run effects of regional policy in an economic union," The Annals of Regional Science, Springer, vol. 30(2), pages 165-183.
  3. Henderson I. Vernon, 1994. "Where Does an Industry Locate?," Journal of Urban Economics, Elsevier, vol. 35(1), pages 83-104, January.
  4. Ilan Salomon, 1996. "Telecommunications, cities and technological opportunism," The Annals of Regional Science, Springer, vol. 30(1), pages 75-90.
  5. Peter Nijkamp & Roberta Capello, 1996. "Telecommunications technologies and regional development: theoretical considerations and empirical evidence," The Annals of Regional Science, Springer, vol. 30(1), pages 7-30.
  6. Gordon F. Mulligan, 1984. "Agglomeration and Central Place Theory: A Review of the Literature," International Regional Science Review, , vol. 9(1), pages 1-42, September.
  7. JASKOLD GABSZEWICZ, Jean & THISSE, Jacques-François, . "Spatial competition and the location of firms," CORE Discussion Papers RP -713, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Kilkenny, Maureen, 1993. "Rural vs. Urban Effects of Terminating Farm Subsidies," Staff General Research Papers 11121, Iowa State University, Department of Economics.
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