Nber Working Paper Series Transportation Costs and the Spatial Organization of Economic Activity

This paper surveys the theoretical and empirical literature on the relationship between the spatial distribution of economic activity and transportation costs. We develop a multi-region model of economic geography that we use to understand the general equilibrium implications of transportation infrastructure improvements within and between locations for wages, population, trade and industry composition. Guided by the predictions of this model, we review the empirical literature on the effects of transportation infrastructure improvements on economic development, paying particular attention to the use of exogenous sources of variation in the construction of transportation infrastructure. We examine evidence from different spatial scales, between and within cities. We outline a variety of areas for further research, including distinguishing reallocation from growth and dynamics. Stephen J. Redding Department of Economics and Woodrow Wilson School Princeton University Fisher Hall Princeton, NJ 08544 and NBER [email protected] Matthew A. Turner Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 CANADA [email protected]