Working Paper: CEPR ID: DP3853
Authors: Klaus Desmet; Marcel Fafchamps
Abstract: 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.
Keywords: location; spatial concentration; transport costs; US counties
JEL Codes: R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Falling transport costs (R41) | Initial increase in concentration of economic activity (E32) |
| Initial increase in concentration of economic activity (E32) | Greater concentration in service sectors (L89) |
| Falling transport costs (R41) | Greater concentration in service sectors (L89) |
| Falling transport costs (R41) | Non-service sectors spreading out (L89) |