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. Key-words: economic geography, transport costs, regional disparities JEL classification: L91, R12, R58 * We gratefully acknowledge Andre de Palma, Robin Lindsey and Kenneth Small for insightful comments.