DP3853 What are Falling Transport Costs doing to Spatial Concentration Across US Counties?

Author(s): Klaus Desmet, Marcel Fafchamps
Publication Date: March 2003
Keyword(s): location, spatial concentration, transport costs, US counties
JEL(s): R11, R12
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3853

Theory is divided on whether falling transport costs lead to more or less spatial concentration of economic activity. Using US county-level data we find that aggregate employment became more concentrated between 1972-92. This aggregate picture hides important differences between sectors though. Whereas non-service sectors have been spreading out, service sectors have become increasingly concentrated by absorbing jobs from nearby areas. This cross-sectional variation lends support to Krugman and Venables (1995), who suggest that falling transport costs initially lead to more concentration, and later on to more dispersion.