How density economies in international transportation link the internal [An article from: Journal of Urban Economics]

This digital document is a journal article from Journal of Urban Economics, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
We present a two-country four-region model of new economic geography that partly endogenizes the level of trade costs. Contrary to the existing literature, we assume that international unit shipping costs depend on the volume of trade, due to the presence of density (dis)economies. We show that agglomeration (or dispersion) within a country may be induced by the geography of the other country through the channel of trade. Furthermore, whereas density economies may give rise to multiple equilibria and catastrophic agglomeration in both countries, density diseconomies lead to a smooth agglomeration process exhibiting a unique stable equilibrium.