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Heterogeneous transport costs and spatial sorting in a model of New Economic Geography

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  • Corey Lang

Abstract

Transportation costs are of central importance in the New Economic Geography literature, though assumptions about transportation costs continue to be simplistic. This paper begins to address these simplifications by assuming that transportation costs for manufactured goods are heterogeneous. Basic results are consistent with standard models showing dispersion of economic activity for high transport costs and eventual agglomeration as transport costs decline. However, several novel features arise too. Many unstable, dispersed equilibria exist for high average transport costs, but converge to a stable equilibrium path as transport costs decrease. Equilibrium paths smoothly transition from dispersion to agglomeration and do so at an increasing rate. Additionally, transport costs directly influence firms' location decisions and firms spatially sort by transport cost. Resumen Los costos de transporte tienen una importancia capital en la literatura sobre la Nueva Geografía Económica, aunque se siguen asumiendo los costos de transporte de manera simplista. Este artículo empieza a tratar estas simplificaciones, asumiendo que los costos de transporte de bienes manufacturados son heterogéneos. Los resultados básicos son consecuentes con los modelos estándar que muestran la dispersión de la actividad económica para costos de transporte elevados y una eventual aglomeración a medida que los costos de transporte disminuyen. Sin embargo, también aparecen varias características novedosas. Existen muchos equilibrios dispersos, inestables, para costos de transporte promedio elevados, pero convergen en una línea de equilibrio a medida que los costos disminuyen. Las líneas de equilibrio tienen una transición fluida de la dispersión a la aglomeración y lo hacen a una tasa en aumento. Además, los costos de transporte influyen directamente las decisiones de localización de las empresas y estas se ordenan espacialmente de acuerdo a los costos de transporte.

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  • Corey Lang, 2010. "Heterogeneous transport costs and spatial sorting in a model of New Economic Geography," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 191-202, March.
    • Handle: RePEc:bla:presci:v:89:y:2010:i:1:p:191-202
    DOI: 10.1111/j.1435-5957.2009.00245.x
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