Decrease In Transport Costs Research Articles

On the number and size of cities*

We study the effects of a decrease in inter-city transport costs on the spatial distribution of population in a multi-regional economy, when a rise in the regional population generates higher urban costs. Holding the number of cities constant, as transport costs are reduced gradually from a very high level to a very low level, there is a first phase in which large cities grow while small cities shrink, a second phase in which both large and small cities grow while medium size cities shrink, and a third phase in which large cities shrink while small cities grow. Furthermore, when the number of cities is allowed to vary as transport costs are reduced from large to small values, it first decreases and then increases.

Why are technological spillovers spatially bounded? A market orientated approach

According to empirical evidence, technological spillovers are spatially bounded. This is one of the main reasons why firms are induced to locate in close proximity despite tough competition. In this paper, we attempt to endogenize such spillovers. For that purpose, we argue that spatial proximity gives more incentives to competing firms to share knowledge. We show that spatial proximity and thus tough competition is the best way for firms to prevent free-riding in case of knowledge sharing. Indeed, fiercer competition impedes free-riding as such a behavior has a dramatic negative impact on profits. Moreover, our results have important implications for regional policy. We point out that a slight decrease in transport costs triggers spatial polarization which implies knowledge sharing and thereby enhances innovation. A more dramatic decrease in transport costs attains both the objectives of increasing innovation and regional equity.

Macroeconomic consequences of downsizing

The recession in the 1980s followed by the worldwide decrease in transportation and communication costs has triggered a process of downsizing. The macroeconomic consequences of this process are only weakly understood. The model developed in this paper associates downsizing with trade between countries with similar tastes, which predominantly exchange very similar, substitutable products. Our two-region model is characterized by the endogenous determination of product variety, firm size, R&D intensity, economic growth, relative productivity, relative wages and welfare. Downsizing enlarges profits, causing an increase in product varieties and a reduction in firm size. Smaller firms allocate less labour to research activities, so that growth is depressed and relative productivity of the region engaging in downsizing declines. The welfare effects of downsizing are shown to be ambiguous and crucially dependent on consumer's taste for variety and their intertemporal elasticity of substitution.

Information asymmetry as a source of spatial agglomeration

This article interprets spatial location as a way for firms to signal innovation. In the model, spatial agglomeration is due to information asymmetry. Moreover, a decrease in inter-regional transport costs has a strong impact on industry and favors agglomeration.

Urban Agglomeration and Dispersion: A Synthesis of Alonso and Krugman

Urban agglomeration becomes increasingly important because of the globalization of world economies. This paper is a general equilibrium analysis of urban agglomeration economies due to product variety, and agglomeration diseconomies due to intra-city congestion in a two-city system framework. Special attention is paid to the impacts of transportation cost decrease on urban concentration and dispersion. Our main result is that dispersion necessarily takes place when the transportation cost is sufficiently low. We also conduct numerical calculations using specific parameter values, and depict a structural transition from dispersion to agglomeration, and then re-dispersion when the transportation costs decrease monotonically over time. Finally, we observe that dispersion is usually bad as compared to agglomeration, from a welfare point of view.

Possible applications of the KAMEDIN teleradiology system with special reference to an economic analysis

Different concepts and applications of teleradiology systems have been realised. However, their cost-effectiveness is still questionable. Therefore, a cost-benefit analysis of three different scenarios of the new teleradiology system Kamedin (Kooperatives Arbeiten und rechnergestützte Medizinische Diagnostik auf innovativen Netzen der Deutschen Telekom) was performed. CT examinations were transmitted from an Advantage Windows (GE) workstation to a Kamedin workstation using DICOM 3 protocol. Afterwards a teleconference was established with a Kamedin workstation in the intensive care unit within the hospital via FDDI/Ethernet, with an external workstation in a radiology department 6 km away via ISDN and with a Kamedin PC located with radiologist on duty 22 km away via ISDN. On average, 36 CT slices per patient were transferred. A break-even analysis was performed with respect to costs of hardware, software, support, use of ISDN and staff, as well as benefits like the decrease in transportation or film documentation costs. Owing to the different reductions in transportation costs, two applications (intensive care unit and external PC) showed a break-even of 1817 and 528 teleconferences/year, respectively. Further optimisation of cost-effectiveness is possible on condition that existing hardware can be used and an automatic data transfer without staff control is available. When all optimisation factors were combined, the break-even decreased to a minimum of 167 and 77 teleconferences/ year, respectively. Teleconferences with high image quality can be set up between workstations and PCs using the Kamedin system. Depending on the possible decrease in transportation costs, teleconferencing is cost-effective under certain conditions. Teleradiology has additional advantages, such as the acceleration and optimisation of patient management.

Existence and Stability of City-Size Distribution in the Gravity and Logit Models

An attempt is made to analyze reasons for and consequences of migration under zero population growth by use of a system of simultaneous differential equations. Intercity migration is assumed to take place based upon differences in utilities, where the utility function is expressed as a function of city size. It is revealed that a deterministic specification of the utility leads to an unstable distribution of city sizes, whereas a stochastic specification does not. Existence and stability of equilibria are examined for two representative stochastic migration models: the origin-constrained gravity model and the logit model. It is then argued that population concentration can be explained by an increase in urbanization economies, and population decentralization can be due to a decrease in intercity transportation and communication costs.

Impacts on Agriculture of Deregulating the Transportation System: Reply

Koo's concerns over the impacts of transportation deregulation on agriculture are justified, but some rate discrimination is necessary for a healthy transport system. The Staggers Act did tip the scales in favor of railroads over agriculture in many instances. However, some type of rail regulatory reform was necessary because the railroad industry could no longer be regulated as a monopoly industry using public utility theory. Transportation requirements are shipper, commodity, and location specific and, therefore, susceptible to rate discrimination. The impacts of effective rail deregulation will be felt differently in different parts of the country and by different parts of agriculture. Koo rightly points out that rail grain rates in the Northern Plains are now relatively higher than in areas of the country where effective water or rail competition exists, and that such price discrimination could be detrimental to farm income. In fact, however, Northern Plains rates always have been high, and there was nothing in the Staggers Act to cause hope of rate relief in that area. This is rate discrimination applied to a whole region. The ICC could rule that rail market dominance exists for grain in the Northern Plains. This would give the ICC jurisdiction over maximum rates. This is not likely given the current deregulation environment but is a solution that exists if the railroads behave badly or if public sentiment swings back to demand more regulation. We will also see various forms of the seasonal and demand sensitive rates that Koo says are now possible. These are examples of the sort of free market activity that economists argued were needed and which would be encouraged and enhanced by rail deregulation. They should lead to more efficient utilization of rail equipment and improved rail operations. If total transportation costs decrease, farmers as a group should be better off, even though farm price fluctuations might very well increase. Therefore, we should not be particularly concerned about rational price discrimination based on the general concepts of geographic region, modal competition, or demand elasticity. These sorts of price discrimination are necessary for a healthy rail industry. However, we should be very concerned about personal discrimination by the railroads. Contracts with favored shippers can be used to avoid the railroad's common carrier obligation to serve the public generally, as well as the Interstate Commerce Act's provisions which forbid personal discrimination in rates and service and require that all rates be published and strictly observed. Unlike trucks, U.S. railroads historically were not allowed to contract with individual shippers. However, the advent of unit trains and similar concepts in the 1960s and 1970s led to de facto contracts between the railroads and individual shippers as tariffs were designed for a single shipper. Prior to 1980, there was some protection for other shippers against unreasonable discrimination through the use of such tariffs. ICC procedures allowed protests at the time of tariff filing and the ICC could order similar tariffs to be published for competing ship-