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Do changes in transport costs and tariffs shape the space‐economy in the same way? *
Author(s) -
Behrens Kristian
Publication year - 2006
Publication title -
papers in regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.937
H-Index - 64
eISSN - 1435-5957
pISSN - 1056-8190
DOI - 10.1111/j.1435-5957.2006.00093.x
Subject(s) - economic rent , economies of agglomeration , economics , order (exchange) , distribution (mathematics) , space (punctuation) , dispersion (optics) , microeconomics , natural resource economics , international economics , economic geography , physics , mathematics , finance , optics , mathematical analysis , linguistics , philosophy
. We investigate how alternative ways of modelling trade costs affect the main results of “new” economic geography. In order to do so, we compare the impacts of falling transport costs and decreasing tariffs on the spatial distribution of economic activities. Our analysis reveals that tariffs and transport costs largely play symmetric roles, in the sense that a decrease in either of them favours agglomeration. Yet, tariffs generate rents which, once redistributed or used to finance local public goods, make dispersion sustainable over a larger range of parameter values. Therefore, decreasing transport costs are more likely to trigger agglomeration than decreasing tariffs.