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Timeliness, Trade and Agglomeration

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  • James Harrigan
  • Anthony J. Venables

Abstract

An important element of the cost of distance is time taken in delivering final and intermediate goods. We argue that time costs are qualitatively different from direct monetary costs such as freight charges. The difference arises because of uncertainty. Unsynchronised deliveries can disrupt production, and delivery time can force producers to order components before demand and cost uncertainties are resolved. Using several related models we show that this generates hitherto unexplored incentives for clustering. If final assembly takes place in two locations and component production has increasing returns to scale, then component production will tend to cluster around just one of the assembly plants.

Suggested Citation

  • James Harrigan & Anthony J. Venables, 2004. "Timeliness, Trade and Agglomeration," NBER Working Papers 10404, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10404
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    References listed on IDEAS

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    1. Michael Storper & Anthony J. Venables, 2004. "Buzz: face-to-face contact and the urban economy," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 351-370, August.
    2. David L. Hummels & Georg Schaur, 2013. "Time as a Trade Barrier," American Economic Review, American Economic Association, vol. 103(7), pages 2935-2959, December.
    3. Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(4), pages 641-665, December.
    4. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    5. Carolyn L. Evans & James Harrigan, 2003. "Distance, time, and specialization," International Finance Discussion Papers 766, Board of Governors of the Federal Reserve System (U.S.).
    6. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
    7. Anthony Venables, 2001. "Geography and International Inequalities: The Impact of New Technologies," Journal of Industry, Competition and Trade, Springer, vol. 1(2), pages 135-159, June.
    8. Cremer, Jacques, 1995. "Towards an economic theory of incentives in just-in-time manufacturing," European Economic Review, Elsevier, vol. 39(3-4), pages 432-439, April.
    9. John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
    10. Thomas H. Klier, 1999. "Agglomeration in the U.S. auto supplier industry," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 18-34.
    11. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
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    Cited by:

    1. Santiso, Javier & Blázquez, Jorge & Rodríguez, Javier, 2006. "Angel or demon?: China's trade impact on Latin American countries," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    2. Gilles Duranton & Michael Storper, 2008. "Rising trade costs? Agglomeration and trade with endogenous transaction costs," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 292-319, February.
    3. Liu, Xiaoyun & Xin, Xian, 2011. "Transportation uncertainty and international trade," Transport Policy, Elsevier, vol. 18(1), pages 156-162, January.
    4. Jang Ping Thia, 2008. "Why Capital does not Migrate to the South: A New Economic Geography Perspective," CEP Discussion Papers dp0895, Centre for Economic Performance, LSE.
    5. Harrigan, James, 2010. "Airplanes and comparative advantage," Journal of International Economics, Elsevier, vol. 82(2), pages 181-194, November.
    6. John Whalley & Xian Xin, 2007. "Regionalization, Changes in Home Bias, and the Growth of World Trade," NBER Working Papers 13023, National Bureau of Economic Research, Inc.
    7. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
    8. Gamberoni, Elisa & Lanz, Rainer & Piermartini, Roberta, 2010. "Timeliness and contract enforceability in intermediate goods trade," Policy Research Working Paper Series 5482, The World Bank.
    9. Nordås, Hildegunn Kyvik & Piermartini, Roberta, 2004. "Infrastructure and trade," WTO Staff Working Papers ERSD-2004-04, World Trade Organization (WTO), Economic Research and Statistics Division.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L0 - Industrial Organization - - General

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