A Reflection on the Effects of Transport Costs Within the New Economic Geography

This paper analyzes, in the light of recent contributions of New Economic Geography models, the spatial consequences of transport cost reductions. So far, the role of transport costs have been only partially unveiled; papers focused either on the Dixit‐Stiglitz‐Iceberg framework or on the alternative framework put forth by Ottaviano et al. (2002) ,—which departs from the former in preferences and transport modeling. This paper goes a step further, offering a comprehensive view that includes the two approaches, in contexts both of two and of more than two locations. Contrary to other revisions of the literature focused mainly on the centripetal forces included in these models, we emphasize the role of dispersion forces. In a two‐location setting, the results seem quite robust against changes in transportation modeling, so that considering either multiplicative transport costs or additive the predictions are identical. However, when allowing for a multilocation setup, the analysis becomes more complex.