A trade hierarchy of cities based on transport cost thresholds

Jorge Díaz-Lanchas*, José Luis Zofío, Carlos Llano

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

4 Citations (Scopus)
20 Downloads (Pure)


Empirical evidence has been lacking to explain trade agglomerations within countries. Starting with a novel micro-database of road freight shipments between Spanish municipalities for the period 2003–07, we break down city (municipal) trade flows into the extensive and intensive margins and assess trade frictions and trade concentration relying on a unique generalized transport cost measure and three internal borders: NUTS-5 (municipal), NUTS-3 (provincial) and NUTS-2 (regional). We find a stark accumulation of trade flows up to a transport cost value of €189 (approximately 170 km) and conclude that this high density is not due to administrative borders effects but to significant changes in the trade-to-transport costs relationship. To support this hypothesis, we propose and conduct an endogenous Chow test to identify significant thresholds at which trade flows change structurally with transport costs. These breakpoints allow us to split the sample when controlling for internal borders, and to define trade market areas corresponding to specific transport costs that consistently reveal an urban hierarchy of cities. The results provide clear evidence with which to corroborate the predictions of Central Place Theory.

Original languageEnglish
Pages (from-to)1359-1376
Number of pages18
JournalRegional Studies
Issue number8
Publication statusPublished - 2022

Bibliographical note

Funding Information:
This work was supported by MINECO [grant number ECO2013-46980-P]; and the Ministerio de Educacion, Cultura y Deporte [grant number FPU-2010].

Publisher Copyright:
© 2021 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.


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