Invest Locally or Globally? A Normative Analysis of Transport Policies in a Footloose Capital Model with Interregional Intraregional Transportation Costs

Abstract

In this paper, we introduce a distinction between interregional and intraregional transportation costs, in a footloose capital model. This allows assessing more precisely the effects of different types of transport policies, on the spatial distribution of activities. From a normative point of view, we find that, in absence of regulation, the concentration of firms is too high in the center. We show what set of transport policies improves the equilibrium.