By Akifumi Kuchiki, Masatsugu Tsuji (eds.)
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Sample text
From the discussion so far, it is important to realize that the signifcant agglomeration of economic activities can emerge only when transport costs become sufficiently low. With a further reduction in transport costs, however, other factors that we have so far neglected become significant. That is, in a larger agglomeration, land prices naturally become higher, which in turn pushes up wage rates in that agglomeration through higher housing costs and higher prices of nontraded goods and services.
In addition, before goods produced at a location reach actual consumers, significant costs are usually involved in retail and wholesale distribution. Over the past half-century, most of these trade costs have been steadily reduced through continuous improvement in transportation and information technologies, together with continuing efforts to lower institutional barriers in international trade, investment and finance. As shown in Fujita (2007), the reduction of trade costs over the last halfcentury has resulted in the relative concentration of the world GDP in three regions - East Asia, ED and NAFTA - even as economic interdependency within each region has become stronger.
Henderson, Y. Kanemoto and T. Mori. "Spatial Distribution of Economic Activities in Japan and China" in V. Henderson and J. Thisse (eds), Handbook of Urban and Regional Economics, vol. 4, North-Holland, Chapter 6, 2912-2977, 2004. Hall, R. E. and C. I. Jones. " Quarterly Journal of Economics 114, 83-116, 1999. Henderson, J. V. " Regional Science and Urban Economics 27, 583612,1997. Krugman, P. " Journal of Political Economy 99, 483-499, 1991a. Krugman P. Geography and Trade. Cambridge, MA: MIT Press, 1991b.