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Conclusions: The Contribution of the Logistics-Costs Model to Theoretical and Empirical Issues in Regional Economics

In: The Economics of Industrial Location

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  • Philip McCann

    (University of Reading)

Abstract

The question of spatial transactions costs is at the heart of the larger question of whether or not regional economies are fundamentally equilibriating in their group behaviour. Transactions costs are held as being a possible major impediment to the efficient working of the market mechanism (Hahn 1971), and in explicitly spatial economic models, the traditional focus of transactions costs analysis has been the role played by transportation costs. However, for most types of industries, transportation costs are found empirically to be only a tiny proportion of total industrial costs. This has meant that the except for where firms produce and trade products which have a very low value-weight ratio, the more recent attempts at providing an explanation of the existence of significant transactions costs over space have generally resulted either in discussions of the relationship between information acquisition and distance, or alternatively in discussions of the impact of sunk costs in reducing locational flexibility.

Suggested Citation

  • Philip McCann, 1998. "Conclusions: The Contribution of the Logistics-Costs Model to Theoretical and Empirical Issues in Regional Economics," Advances in Spatial Science, in: The Economics of Industrial Location, chapter 7, pages 209-216, Springer.
    • Handle: RePEc:spr:adspcp:978-3-662-03702-7_8
    DOI: 10.1007/978-3-662-03702-7_8
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