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Spatial Externalities, Inefficiency, and Sufficient Statistics

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  • Gabriel Kreindler
  • Kartik Patekar

Abstract

How much economic inefficiency is generated by spatial externalities such as agglomeration or congestion? What can we learn with data and variation around an inefficient equilibrium? We express deadweight loss in an equilibrium model with spatial externalities, building on Harberger (1964). Our expressions depend on two empirical objects, an externality matrix and a Slutsky substitution matrix. This provides a basis for assessing how modeling assumptions, especially related to patterns of demand substitution and the variation used for estimation, may constrain inefficiency conclusions. We illustrate extensions to our approach with two examples: electric vehicle chargers and peak-hour traffic congestion.

Suggested Citation

  • Gabriel Kreindler & Kartik Patekar, 2025. "Spatial Externalities, Inefficiency, and Sufficient Statistics," AEA Papers and Proceedings, American Economic Association, vol. 115, pages 551-556, May.
    • Handle: RePEc:aea:apandp:v:115:y:2025:p:551-56
    DOI: 10.1257/pandp.20251080
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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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