| Summary: | Iceland s population of approximately fifty thousand inhabitants did not change appreciably from the end of the settlement period in the late twelfth century until the mid-nineteenth century because of the climate and limited technology in agriculture and fisheries. In fact, periodic decreases resulted from climatic fluctuations, natural disasters and epidemics, since this was a primitive rural community of farmers and fishermen. The weakness of the urban community was so apparent that when the royal monopoly on domestic trade was abolished by law in 1788, new migrants from selected villages to urban communities1 were offered public subsidies, such as free lots and tax dispensation for twenty years. Despite this government intervention, the growth of the urban population, especially in the capital city, did not manifest until early in the twentieth century following technological developments, such as the advent of motor vessels, banks, and certain infrastructure investments. That is probably because the Danish authorities and Icelanders were not unanimous in their policies and actions. The growth of the urban population was followed by a decline in the rural population. This trend increased after World War II, and at the beginning of the 1980s, the population of the urban areas outside the capital area2 began to decline as well, especially those populations that were farthest away from Reykjavík and Akureyri, the second-largest urban community outside the capital area. The present research s objective is to investigate whether transportation improvements affect inter-regional migration in Iceland. This thesis is divided into three main parts. First, a brief introduction describes the development of the transportation system in Iceland, especially the road network, and geographic population patterns in the twentieth century. The second part covers fundamental theories of transportation economics and spatial economics, especially regarding transport demand, the geographic pattern of housing prices, theories of ...
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