Trade Openness, Transport Networks and the Spatial Location of Economic Activity

We rely on the economic theory approach to index numbers to improve the existing definitions and decompositions of variations in generalized transport costs (GTCs). As a value index, we decompose GTCs into price and quantity indices associated to economic—market—costs and infrastructure variables—distance and time within a network. The methodology allows the accurate identification of the sources of GTCs decline. We illustrate it for the case of road freight transportation in Spain between 1980 and 2007 and at a highly detailed geographical level. Average GTCs weighted by trade flows have decreased by 16.3%, with infrastructure driving that reduction. We find large territorial disparities in GTCs, but also significant geographical clusters where the market and network indices show spatial association.

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