Why an Economic Core: Domestic Transport Costs

Abstract

What determines the spatial distribution of economic activity? And why is economic activity sometimes ‘lumpy’, distributed in a core-periphery pattern in some countries? This article uses new subregional data on the spatial distribution of economic activity for a large cross section of countries, as well as information on roads, rails and surface topography to help understand the role of domestic transport costs in shaping economic geography. The evidence suggests a significant role for physical geography and transport costs in determining the location of economic activity. Countries with rougher surfaces have less developed road and rail transport networks, and greater spatial concentration of economic activity.

Keywords: spatial concentration, domestic transport costs

JEL Classification: R12, R40, F12