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Transport Costs and Rural Development
Author(s) -
Kilkenny Maureen
Publication year - 1998
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/1467-9787.00093
Subject(s) - social accounting matrix , computable general equilibrium , context (archaeology) , economies of scale , economics , agriculture , general equilibrium theory , wage , rural area , scale (ratio) , product (mathematics) , service (business) , production (economics) , microeconomics , business , natural resource economics , labour economics , economy , geography , medicine , geometry , cartography , mathematics , archaeology , pathology
Innovations that reduce costs of transport from rural locations may also reduce transport costs to rural areas. As transport costs fall, producers can afford to concentrate and achieve economies of scale. This paper explains an initially negative, but ultimately positive, relationship between reductions in transport costs and rural development. A two‐region general equilibrium model with firm and worker spatial mobility highlights the firm and household location implications of costly transport‐service use by both industry and agriculture in the context of scale economies and product differentiation. The computable general equilibrium model is initialized and verified with a bi‐regional social accounting matrix and then used for simulations. Changes in relative transport costs are shown to affect relative regional wage rates, thus also determining the location of “production‐cost‐oriented” firms.