A trade hierarchy of cities based on transport cost thresholds

Figures & data

Figure 1. Logarithm of total value of trade for the 633 municipalities.

Note: Graduated map with averages for the period 2003–07.

Source: Authors’ own elaboration from the Spanish Road Freight Transportation Survey (RFTS) data.

Table 1. Transport costs changes: averages for pairs of municipalities.

Transport costs	2003–07	2003	2005	2007	Growth rates (%)
GTC	333.61	347.69	343.87	305.97	−12.00%
Distance	313.51	313.02	313.39	313.49	0.15%
Travel time	287.19	290.21	286.58	284.16	−2.08%

Source: Authors’ own elaboration from the generalized transport cost (GTC) database.

Table 2. Ordinary least squares (OLS) regressions in growth rates.

Transport costs	$\mathrm{\Delta }{T}_{ijt}$	$\mathrm{\Delta }{N}_{ijt}$	${\overline{PQ}}_{ijt}$
$\mathrm{\Delta }GT{C}_{ijt}$	−0.0296**	−0.0355**	−0.0275*
$\mathrm{\Delta }Distanc{e}_{ijt}$	−0.00181	−0.00336	0.00433
$\mathrm{\Delta }Tim{e}_{ijt}$	0.00281	0.000761	0.00461

Note: Significance level: ***p < 0.01; **p < 0.05; and *p < 0.1.

Figure 2. Kernel regressions of trade variables on generalized transport costs (GTCs) for pair of municipalities.

Table 3. Poisson pseudo-maximum likelihood (PPML) estimations with generalized transport cost (GTC) and internal borders.

Variables	Total value of trade	Extensive margin	Intensive margin
	($T_{ij}$)	($N_{ij}$)	(${\overline{PQ}}_{ij}$)
$GT{C}_{ijt}$	−0.266***	−0.290***	−0.0423***
	(0.0322)	(0.0142)	(0.00537)
$GTCS{q}_{ijt}$	0.000***	0.000***	0.000***
	(0.000)	(0.000)	(0.000)
$Contiguit{y}_{ijt}$	1.365***	1.126***	0.458***
	(0.0708)	(0.0330)	(0.0311)
$NUTS-5_{ijt}$	3.764***	3.236***	0.983***
	(0.101)	(0.0496)	(0.0594)
$NUTS-3_{ijt}$	1.717***	1.406***	0.320***
	(0.0840)	(0.0392)	(0.0255)
$NUTS-2_{ijt}$	0.346***	0.338***	0.0375
	(0.0777)	(0.0354)	(0.0259)
Year FE	Yes	Yes	Yes
Origin FE	Yes	Yes	Yes
Destination FE	Yes	Yes	Yes
N	195,026	195,026	195,026
Pseudo-R^2	0.501	0.772	0.007

Note: Clustered standard errors are by ij. Standard errors are shown in parentheses.

Significance level: ***p < 0.01; **p < 0.05; and *p < 0.1.

FE, fixed effects.

Table 4. Cross-section regressions for 2003 and 2007.

	Border	2003	2007
Total value of trade ($T_{ij}$)	NUTS-5	3.795***	2.835***
	NUTS-3	1.581***	1.079***
	NUTS-2	0.179*	−0.0313
Extensive margin ($N_{ij}$)	NUTS-5	3.151***	2.555***
	NUTS-3	1.184***	0.906***
	NUTS-2	0.174*	−0.00365
Intensive margin (${\overline{PQ}}_{ij}$)	NUTS-5	0.958***	0.841***
	NUTS-3	0.363***	0.291***
	NUTS-2	0.00161	0.0201

Note: Significance level: ***p < 0.01; **p < 0.05; and *p < 0.1.

Table 5. Generalized transport cost (GTC) breakpoints for the total value of trade and extensive margin: averages for the period 2003–07.

Variable	GTC breakpoints (€)
	Breakpoint 1	Breakpoint 2	Breakpoint 3	Breakpoint 4	Breakpoint 5
$T_{ij}$	189***	233***	285***	513*	706***
$N_{ij}$	185***	246***	321***	582***	655**

Note: Significance level: ***p < 0.01; **p < 0.05; and *p < 0.3.

Figure 3. Natural trade areas using generalized transport cost (GTC) breakpoints.

Note: Averages for the period 2003–07.

Table 6. Pseudo-maximum likelihood (PPML) estimations by generalized transport cost (GTC) thresholds: total value of trade, averages for the period 2003–07.

	GTC thresholds
${\overline{T}}_{ij}$	(€0–189]	(€189–285]	(€285–513]	(€513–706]	> €706	General specification
${\overline{GTC}}_{ij}$	−0.0145***	0.00262**	−0.00243***	−0.00329***	−0.00142***	−0.00525***
	(0.000339)	(0.00127)	(0.000185)	(0.000309)	(0.000125)	(0.000339)
$\overline{GTC}S{q}_{ij}$	–	–	–	–	–	0.000***
						(0.000)
$Contiguit{y}_{ij}$	0.911***	–	–	–	–	1.232***
	(0.0335)					(0.0702)
$NUTS-5_{ij}$	3.022***	–	–	–	–	3.269***
	(0.0421)					(0.0836)
$NUTS-3_{ij}$	1.059***	2.233***	–	–	–	1.247***
	(0.0348)	(0.318)				(0.0645)
$NUTS-2_{ij}$	0.427***	0.0184	0.189***	1.347***	–	0.0945
	(0.0374)	(0.117)	(0.0708)	(0.102)		(0.0692)
FE origin	Yes	Yes	Yes	Yes	Yes	Yes
FE destiny	Yes	Yes	Yes	Yes	Yes	Yes
N	17,532	4493	7914	4720	4386	39,045
$pseudo-R^2$	0.915	0.546	0.455	0.680	0.407	0.881

Note: Clustered standard errors are by ij. Standard errors are shown in parentheses. Significance level: ***p < 0.01; **p < 0.05; and *p < 0.1.

The use of origin and destiny fixed effects and the lower number of observations in the €189–233 GTC interval forces us to include breakpoint 2 (€233) within the interval €189–285.

FE, fixed effects.

Table 7. Pseudo-maximum likelihood (PPML) estimations by generalized transport cost (GTC) thresholds: extensive margin, averages for the period 2003–07.

	GTC thresholds
${\overline{N}}_{ij}$	(€0–185]	(€185–246]	(€246–321]	(€321–582]	(€582–655]	> €655	General specification
${\overline{GTC}}_{ij}$	−0.0140***	−0.00357***	−0.00528***	−0.00175***	−0.00231***	−0.00133***	−0.00725***
	(0.000199)	(0.000572)	(0.000558)	(0.000143)	(0.000858)	(7.74e–05)	(0.000233)
$\overline{GTC}S{q}_{ij}$	–	–	–	–	–	–	0.000***
							(0.000)
$Contiguit{y}_{ij}$	0.767***	–	–	–	–	–	1.037***
	(0.0171)						(0.0359)
$NUTS-5_{ij}$	2.556***	–	–	–	–	–	2.870***
	(0.0232)						(0.0518)
$NUTS-3_{ij}$	0.808***	1.276***	1.553***	–	–	–	1.060***
	(0.0198)	(0.0789)	(0.101)				(0.0436)
$NUTS-2_{ij}$	0.293***	−0.0164	0.161***	0.553***	–	–	0.118***
	(0.0231)	(0.0363)	(0.0487)	(0.0578)			(0.0423)
Origin FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Destiny FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes
N	17,316	3172	2860	8607	1834	5256	39,045
$pseudo-R^2$	0.919	0.774	0.654	0.375	0.802	0.541	0.894

Note: Clustered standard errors are by ij. Standard errors are shown in parentheses. Significance level: ***p < 0.01; **p < 0.05; and *p < 0.1.

FE, fixed effects.

Figure 4. Kernel regressions between total value of trade and generalized transport costs (GTCs) for the municipalities of Madrid and Barcelona.

Table 8. Distribution of municipalities by different products and trading partners: $N_{ij}^k$. Percentage of municipalities in each interval, 2003 and 2007.

	Number of trading partners
Number of commodities	(1–10]	(10–50]	(50–100]	>100
2003
(1–10]	3.04%	8.61%	0.16%	0.00%
(10–50]	0.32%	38.6%	11.0%	0.16%
(50–100]	0.00%	1.91%	17.3%	2.71%
> 100	0.00%	0.00%	1.91%	14.19%
2007
(1–10]	1.92%	5.43%	0.00%	0.00%
(10–50]	1.12%	42.1%	8.31%	0.00%
(50–100]	0.00%	1.76%	19.1%	1.60%
> 100	0.00%	0.00%	3.04%	15.5%

Source: Authors’ own elaboration from the Spanish Road Freight Transportation Survey (RFTS) data.

Table 9. Municipalities grouped by clusters: averages for the period 2003–07.

Municipal rank	Number of municipalities
Rank 1	4
Rank 2	21
Rank 3	101
Rank 4	507

Figure 5. Kernel regressions between total trade and generalized transport costs (GTCs) for each pair of municipalities grouping them by clusters.

Note: Averages for the period 2003–07.

Table 10. Generalized transport cost (GTC) breakpoints by city rank: averages for the period 2003–07.

City	Variable	Breakpoint 1	Breakpoint 2	Breakpoint 3	Breakpoint 4
Rank 1	$GT{C}_{ij}$ (€)	94***	188***	261***	665***
	$T_{ij}$ (logs)	17.73	16.33	16.28	16.21
	$T_{ij}$/$GT{C}_{ij}$ (logs)	13.18	11.07	10.71	9.71
Rank 2	$GT{C}_{ij}$ (€)	144***	262***	609***	676***
	$T_{ij}$ (logs)	15.67	14.95	15.31	15.18
	$T_{ij}$/$GT{C}_{ij}$ (logs)	10.72	9.38	8.90	8.67
Rank 3	$GT{C}_{ij}$ (€)	277***	430***	681***	756***
	$T_{ij}$ (logs)	14.32	14.61	14.78	15.12
	$T_{ij}$/$GT{C}_{ij}$ (logs)	8.69	8.55	8.26	8.49
Rank 4	$GT{C}_{ij}$ (€)	257***	–	–	–
	$T_{ij}$ (logs)	14.05
	$T_{ij}$/$GT{C}_{ij}$ (logs)	8.50

Note: Significance level: ***p < 0.01; **p < 0.05; and *p < 0.1.

Figure 6. Urban hierarchy and natural trade areas for rank 1 municipalities.

Note: Plotted are the first, second and third generalized transport cost (GTC) breakpoints. The fourth breakpoint is equal to e665.