Logistics costs and the location of the firm: A one-dimensional comparative static approach

This paper argues that, ingnoring information costs, within real historical time the total costs of distance are much greater than simply transportation costs. The reason is that transportation costs are only one component of total logistics costs, which also include inventory holding and purchasing costs, and these total logistics costs can be shown to be directly related to haulage distance. Evidence for the importance of total logistics costs relative to transportation costs is provided. Furthermore, from this perspective it is shown that the interregional mobility of a firm will depend on the prices of the goods being shipped.