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Rising trade costs? Agglomeration and trade with endogenous transaction costs

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  • Duranton, Gilles
  • Storper, Michael

Abstract

While transport costs have fallen, the empirical evidence also points at rising total trade costs. In a model of industry location with endogenous transaction costs, we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade.

Suggested Citation

  • Duranton, Gilles & Storper, Michael, 2005. "Rising trade costs? Agglomeration and trade with endogenous transaction costs," LSE Research Online Documents on Economics 19898, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:19898
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    References listed on IDEAS

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    More about this item

    Keywords

    Transaction costs; trade costs; transport costs; agglomeration; vertically linked industries;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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