Transport Costs and New Economic Geography

Posted: 29 Feb 2008

See all articles by Philip McCann

Philip McCann

University of Reading - Department of Economics

Date Written: June 2005

Abstract

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: JEL classifications: R120, R340, R400

Suggested Citation

McCann, Philip, Transport Costs and New Economic Geography (June 2005). Journal of Economic Geography, Vol. 5, Issue 3, pp. 305-318, 2005, Available at SSRN: https://ssrn.com/abstract=917687

Philip McCann (Contact Author)

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom
+44 (0)118 9314074 (Phone)

HOME PAGE: http://www.rdg.ac.uk/IEAS/staff/McCann.htm

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