DP4933 | Rising Trade Costs? Agglomeration and Trade with Endogenous Transaction Costs

Publication Date

23/02/2005

JEL Code(s)

Keyword(s)

Programme Area(s)

Abstract

While transport costs have fallen, the empirical evidence also points at rising total trade costs. In a model of industry location with endogenous transaction costs, we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade.