Transport Costs and Spatial Inequalities
Improvements in transport infrastructures (modal and intermodal) and the related reductions in transport costs may have two major economic consequences:
  • Exploitation of comparative advantages. Production can be located where inputs (such as labor) are minimal, enabling a better usage of the global competitive advantages. Outputs can then be shipped to customers across the world.
  • Development of economies of scale. A location can further develop economies of scale by having access to a wider markets because of lower transport costs. Even if other locations may have lower input costs, notably in terms of labor, these advantages may not initially be sufficient enough to compensate for the advantages of economies of scale.
Considering the balance between the centrifugal effects of the exploitation of comparative advantages and the centripetal effects of economies of scale, globalization and its associated reduction in transport costs appears to promote more centripetal than centrifugal forces (more inequalities). However, this shift is linked with a specific level of transport costs beyond which inequalities may be reduced. For instance, on the above figure, high transport costs characterize relatively self sufficient regional economies and lower levels of inequalities (A; as measured in GDP per capita). As transport costs are reduced, inequalities are likely to increase since economies of scale are usually the first to benefit (B). In these two phases, the core has a higher development rate than the periphery and a pattern of unequal trade can emerge, as it was the case between the developed and the developing countries up to the 1970s.
However, further improvements in transport infrastructures favor a more efficient use of comparative advantages, compensating for the initial economies of agglomeration advantages. This results in a relocation of economic activities in the periphery and a wider access to the markets of the core. The likely outcome is a decline in inequalities (C) with elements of the periphery becoming part of the core. For instance, many developing countries, especially in Pacific Asia (Japan, Taiwan, South Korea, Hong Kong, Singapore and more recently China), have experienced significant growth to become a pole (core) of the global economy. Since this growth is highly related to their growing access to the global economy (export-oriented development), transportation has been a significant factor in the reduction of inequalities at the global level.