28 Pages Posted: 11 Jan 2008
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 that seeks to replicate features from the machinery industry, we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade. The subtle relationship between (endogenous) transport costs and the sensitivity of trade to distance is also explored.
JEL Classification: D23, R12
Suggested Citation: Suggested Citation
Duranton, Gilles and Storper, Michael, Rising Trade Costs? Agglomeration and Trade with Endogenous Transaction Costs. Canadian Journal of Economics/Revue canadienne d'économique, Vol. 41, Issue 1, pp. 292-319, February/février 2008. Available at SSRN: https://ssrn.com/abstract=1082611 or http://dx.doi.org/10.1111/j.1365-2966.2008.00464.x
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