American Economic Review: Vol. 95 No. 1 (March 2005)
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Distance, Time, and Specialization: Lean Retailing in General Equilibrium
Evans, Carolyn L., and James Harrigan. 2005. "Distance, Time, and Specialization: Lean Retailing in General Equilibrium." American Economic Review, 95(1): 292-313.
Transport time increases with distance traveled, and time is valuable. We show the implications of these facts for global specialization and trade: products where timely delivery is important will be produced near the source of final demand, where wages will be higher as a result. In the model, timely delivery is important because it allows retailers to respond to final demand fluctuations without holding costly inventories, and timely delivery is possible only from nearby locations. Using a unique dataset that allows us to measure the retail demand for timely delivery, we show that the sources of U.S. apparel imports have shifted in the way predicted by the model, with products for which timeliness matters increasingly imported from nearby countries.
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Evans, Carolyn L.