Timeliness, Trade and Agglomeration

38 Pages Posted: 16 Apr 2004 Last revised: 3 Sep 2009

See all articles by James Harrigan

James Harrigan

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

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Date Written: April 2004

Abstract

An important element of the cost of distance is time taken in delivering final and intermediate goods. We argue that time costs are qualitatively different from direct monetary costs such as freight charges. The difference arises because of uncertainty. Unsynchronised deliveries can disrupt production, and delivery time can force producers to order components before demand and cost uncertainties are resolved. Using several related models we show that this generates hitherto unexplored incentives for clustering. If final assembly takes place in two locations and component production has increasing returns to scale, then component production will tend to cluster around just one of the assembly plants.

Suggested Citation

Harrigan, James and Venables, Anthony J., Timeliness, Trade and Agglomeration (April 2004). NBER Working Paper No. w10404. Available at SSRN: https://ssrn.com/abstract=528985

James Harrigan (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

National Bureau of Economic Research (NBER)

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Anthony J. Venables

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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