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.

---

April 2005     Paper Number CEPDP0683

Download PDF - Rising Trade Costs? Agglomeration and Trade with Endogenous Transaction Costs

This CEP discussion paper is published under the centre's Trade programme.