The Mississippi River and Agricultural Trade: A Spatial Equilibrium Approach

The Mississippi River system is a critical artery for U.S. agricultural commodities and intermediate inputs, connecting domestic production to Gulf export terminals. This paper quantifies the contribution of this navigation system to U.S. agricultural trade and welfare. We develop a multi-sector spatial general equilibrium model featuring inputoutput linkages, inter-state labor mobility, and a bilateral trade cost technology that admits endogenous mode and transit hub substitution. We find that disabling commercial barge navigation on the Mississippi system reduces aggregate U.S. agricultural exports by 8.92 percent and production by 1.30 percent, driven by severe drops in cereal grain (−11.8 percent) and animal feed (−12.6 percent) exports. The aggregate U.S. welfare loss is 0.33 percent, or $29.2 billion annually, with spatial incidence heavily concentrated in Louisiana, West Virginia, and Corn Belt grain producers. Roughly one-third of the aggregate loss operates through input-output amplification via the fertilizer, coal and petroleum sectors. We estimate that the river’s contribution to U.S. welfare exceeds total annualized federal cost of the system by a factor of eight, indicating an exceptionally high marginal productivity of federal capital.