Trade and the Topography of the Spatial Economy
AbstractWe develop a versatile general equilibrium framework to determine the spatial distribution of economic activity on any surface with (nearly) any geography. Combining the gravity structure of trade with labor mobility, we provide conditions for the existence, uniqueness, and stability of a spatial economic equilibrium and derive a simple set of differential equations which govern the relationship between economic activity and the geography of the surface. We then use the framework to estimate the topography of trade costs, productivities, amenities and the strength of spillovers in the United States. We find that geographic location accounts for 24% of the observed spatial distribution of income. Finally, we calculate that the construction of the interstate highway system increased welfare by 3.47%, roughly twice its cost.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19181.
Date of creation: Jun 2013
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Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-05 (All new papers)
- NEP-GEO-2013-07-05 (Economic Geography)
- NEP-INT-2013-07-05 (International Trade)
- NEP-URE-2013-07-05 (Urban & Real Estate Economics)
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- A. Kerem Cosar & Banu Demir, 2014. "Domestic Road Infrastructure and International Trade: Evidence from Turkey," KoÃ§ University-TUSIAD Economic Research Forum Working Papers 1406, Koc University-TUSIAD Economic Research Forum.
- Trevor Tombe & Jennifer Winter, 2014. "What's Inside Counts: Migration, Taxes, and the Internal Gains from Trade," Working Papers 2013-28, Department of Economics, University of Calgary, revised 05 Feb 2014.
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