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The effects of transport costs revisited

  • Olga Alonso Villar

The aim of this paper is to study the location decisions of upstream and downstream industries when transport costs in each sector are analyzed separately. By using a new economic geography model built on Venables (1996), it will be shown that the effects of cost reductions in transporting final goods are different from those in intermediate goods. Our analysis suggests that regional convergence is more the consequence of improvements in transportation between upstream and downstream firms than those between firms and consumers. This will help us to better understand the forces driving this kind of model while giving an additional explanation to the differences between Krugman’s (1991) results and those of Venables (1996).

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Paper provided by Universidade de Vigo, Departamento de Economía Aplicada in its series Working Papers with number 0407.

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Length: 23 pages
Date of creation: Jul 2004
Date of revision:
Handle: RePEc:vig:wpaper:0407
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  1. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," International Trade 0103003, EconWPA.
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