Transport policies in light of the new economic geography: The Portuguese experience

Using the case study of Portugal over the period 1985 to 1998, this paper reports on an empirical test of hypotheses derived from the new economic geography paradigm and on its policy implications. Our results seem to confirm the empirical relevance of the underlying model over different periods of time. We also find that Portuguese transport policy has not contributed towards spatial equity. However, our simulation of a further planned expansion of the transport network shows that if transport costs are lowered sufficiently industry will spread. This suggests a bell-shaped relationship between transport costs and agglomeration, as has already been proposed by theory. (c) 2006 Elsevier B.V. All rights reserved.