The costs of distance: transport costs and new technologies

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Steve Redding - who has looked at transport costs and other barriers to trade: the more distant countries suffer a market access penalty on their sales and face additional costs on imported intermediate inputs.

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Distance matters greatly for almost all economic transactions. Gravity model estimates of goods trade, of cross-border equity transactions, of foreign direct investment, and of technology transfers all show that the volume of flows is sharply curtailed by distance, typically halving with every doubling of distance. Yet at the same time, transport technologies are improving, and new technologies are making some activities 'weightless', leading to claims that we are witnessing the 'death of distance'.

The CEP's research in this area includes:

• Limão, N. and A.J. Venables (1999) 'Infrastructure, Geographical Disadvantage and Transport Costs', Department of Economics, London School of Economics.
• Venables, A.J. (2001) 'Geography and international inequalities: the impact of new technologies', Paper prepared for World Bank Annual Bank Conference on Development Economics, Washington.
• Quah, D. (2001) 'The weightless economy in economic development', Chapter 4 in M Pohjola, Information Technology, Productivity, and Economic Growth: International Evidence, Oxford University Press. Also available as CEP Discussion Paper 417.

Other useful links:

• Danny Quah maintains a site on the "Weightless Economy".