Cities, regions and the decline of transport costs*


  • *

    Glaeser thanks the National Science Foundation, the Taubman Center, and the Rappaport Institute for support and Jesse Shapiro for providing tremendous assistance. Kohlhase thanks Jia-Huey Ling and Anuja Krishnan for helpful research assistance.


Abstract. The theoretical framework of urban and regional economics is built on transportation costs for manufactured goods. But over the twentieth century, the costs of moving these good have declined by over 90% in real terms, and there is little reason to doubt that this decline will continue. Moreover, technological change has eliminated the importance of fixed infrastructure transport (rail and water) that played a critical role in creating natural urban centres. In this article, we document this decline and explore several simple implications of a world where it is essentially free to move goods, but expensive to move people. We find empirical support for these implications.