Abstract
In this paper, weinvestigate the effect of transport market structure on the distribution of economic activity. To achieve this purpose, we extend an economic geography model developed by Thisse8) in order to incorporate the transport sector. Analysis of this model shows that if the carriers' entry is free, agglomeration of economic activity increases price competition among carriers that fosters further agglomeration. By contrast, if entry is regulated, the agglomeration increases the carriers' market power. Consequently, entry regulation in the transport sector may lead to the collapse of the agglomeration.
