Directional imbalance in transport prices and economic geography

This paper examines how and why transport prices become imbalanced with respect to the direction of shipments and how this affects economic geography. It is shown that the equilibrium transport price of the shipment in a particular direction is a nondecreasing function of the relative size of the embarkation region. Furthermore, we show that the directional imbalance in transport prices increases the likelihood of the symmetric pattern being stable and decreases the likelihood of the core-periphery patterns being sustainable. In short, the imbalance acts as a dispersion force.

Research highlights RHtriangle A conventional NEG model is extended to incorporate a transport sector.  RHtriangle Transport cost is not a constant but endogenously determined in our model.  RHtriangle Directional imbalance makes the core-periphery patterns less sustainable.  RHtriangle Directional imbalance in transport prices stabilizes the symmetric pattern.  RHtriangle Directional imbalance in transport prices acts as a dispersion force.