Reports
Discussion Papers
No.488 Agglomeration and directional imbalance of freight rates: The role of density economies in the transport sector
by TSUBOTA Kenmei
February 2015
ABSTRACT
This paper examines the conventional assumption that bilateral transport costs are symmetric. We develop an economic geography model with transport sector in which asymmetric freight rates can occur as a result of density economies. Comparing this to models without density economies, we show that agglomeration of economic activities is more likely to emerge and that multiple equilibria can emerge for some parameters. Then we show the change in its bifurcation and stability of equilibrium and conclude that economies of density in transport flows can act as an agglomeration force.
Keywords: agglomeration, asymmetric transport costs, directional imbalance of freight rates, density economies
JEL classification: L91, R12, R41,
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