New Economic Geography: The Role of Transport Costs

Abstract

The chapter surveys the main contributions of new economic geography from the point of view of transport analysis. It shows that decreasing transport costs is likely to exacerbate regional disparities. However, very low transport costs should foster a more balanced distribution for economic activities across space. Thus, the spatial curve of development, which relates the degree of spatial concentration to the level of transport costs, would be bell-shaped. The paper also provides a detailed discussion of the main determinants of transport costs, which remain fairly large in most countries. It concludes with a discussion of some policy implications.

Transport Infrastructure, Spatial Clusters and Regional Economic Growth in China

“…Macroeconomics can help explain whether and to what degree transport infrastructure can lower production costs and increase the level of economic output (Samuelson, 1954;Krugman, 1991Krugman, , 1995Fujita et al, 1999;Lafourcade, 2009). Meanwhile, there are a variety of opinions among decision-makers and economists as to the causal mechanism between transport infrastructure improvements and output and productivity enhancements (Fujita and Thisse, 2002;Zhang and Sun, 2008;Lakshmanan, 2011).…”

Peripherality in the global container shipping network: the case of the Southern African container port system

“…Other schools of thought such as the New Economic Geography (NEG) have questioned the direct causality between peripherality and economic disadvantage (Behrens et al 2006), since high transport costs caused by remoteness may in turn create advantages in the form of reduced competition from outside. Lafourcade and Thisse (2011) discuss the role of transport costs in enticing agglomeration or dispersion of economic activities across space in the core-periphery model. Some NEG scholars in the case of ports however have proposed that the transport link between the core and the periphery should deteriorate (instead of improving) in order to foster port-related growth at coastal cities (Fujita and Mori 1996; see also Ducruet 2009).…”

Beyond cost-benefit analysis: the search for a comprehensive evaluation of transport investment

“…The approach which has offered most potential in combining these various issues with a tractable model is that of the so-called new economic geography following the seminal work of Krugman (1991) and brought together in a fuller analysis by Fujita et al (1999) (see also Lafourcade and Thisse, 2011, for a valuable summary of the state of the art). The essence of the approach, which originates in trade theory, is that, in a world of imperfect competition not characterised by constant returns to scale, the trade-off between transport (trade) costs and market size can lead to differing outcomes according to the initial values of these elements and the degree of change of the costs.…”