more rapidly than p because commuting costs are more important for labour than transport
costs for commodity prices. In addition, the labour force is inherently regional, whilst
commodities typically are produced in other regions or abroad, implying that the effect of
local transport system improvements are greater for w than for p.
Figur 3 Technological externalities associated with transport system improvements
In the case of technological externalities, shown in figure 3, demand for labour at a given real
wage increases because of non-market interaction effects arising from transactions undertaken
by other agents. In this case of technological change, the demand curve for labour including
transport costs (DTC) shifts to the right, creating a new labour market equilibrium, as shown in
figure 3, moving from c to g. This means that demand for labour increases from l1 to l2 and
the real wage increases from a to e. The wage bill increases from acl1o to egl2o. The change in
total expenditure on transport is shown by cghd.
3. Proximity, income and externalities in Denmark
The previous section outlined a priori expectations concerning the relationship between
changes in the transport system and externality effects in relation to the labour market. First,
that there is a positive relationship between changes in transport costs and the level of real
wages in the case of changes in accessibility in the labour and commodity markets, this being
the effect of pecuniary externalities. Second, there is a negative relationship between changes
in transport costs and changes in the level of real wages in the case of changes in accessibility
to urban centres. This is the effect of urban (technological) externalities. The analysis also
revealed that it is important to distinguish between the direct effects of externalities (which
appear at the place of production and in the unit of production) and the end user effects, which