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Journal of Economic Geography Advance Access originally published online on February 24, 2005
Journal of Economic Geography 2005 5(3):305-318; doi:10.1093/jnlecg/lbh050
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© The Author (2005). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oupjournals.org

Transport costs and new economic geography

Philip McCann*

* Department of Economics, University of Reading, RG6 6AW, UK. E-mail: p.mccann{at}reading.ac.uk

This paper uncovers some little-known properties of the iceberg transport cost functions which are employed in some new economic geography models. In particular the behaviour of the delivered prices generated by the Krugman iceberg specification is very different to those generated by the original Samuelson iceberg model, and these differences require careful interpretation of the outcomes of the explicitly spatial versions of new economic geography models. If the iceberg model is viewed simply as transport costs, then these properties can be shown to be largely implausible when compared with a wide range of empirical evidence. At the same time, even if the iceberg model is viewed as capturing a range of different distance costs, there are still grounds for cautiousness in the way that inferences are made from these models when moving from theory to reality or policy analysis.

Keywords: Transport costs, distance economic geography,
JEL classifications: R120, R340, R400
Date submitted: 9 January 2003     Date accepted: 10 August 2004


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