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Journal of Economic Geography Advance Access originally published online on June 22, 2005
Journal of Economic Geography 2005 5(5):589-604; doi:10.1093/jeg/lbh075
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© The Author (2005) Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

The effects of transport costs revisited

Olga Alonso-Villar*

* Universidade de Vigo; Departamento de Economía Aplicada; Campus Lagoas-Marcosende s/n; 36310 Vigo; Spain. email <ovillar{at}uvigo.es>

The aim of this paper is to study the location decisions of upstream and downstream industries when transport costs in each sector are analysed 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 these kinds of models while giving an additional explanation to the differences between Krugman's (1991) results and those of Venables (1996).

Keywords: location of firms, monopolistic competition, input-output linkages, transport costs,
JEL classifications: F12, R12, F15, O18
Date submitted: 29 January 2004     Date accepted: 18 April 2005


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