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The Geography of Development

Author

Listed:
  • Desmet, Klaus
  • Rossi-Hansberg, Esteban
  • Nagy, Dávid Krisztián

Abstract

We study the relationship between geography and growth. To do so, we first develop a dynamic spatial growth theory with realistic geography. We characterize the model and its balanced-growth path and propose a methodology to analyze equilibria with different levels of migration frictions. Different migration scenarios change local market size and therefore innovation incentives and the evolution of technology. We bring the model to the data for the whole world economy at a 1º x 1º geographic resolution. We then use the model to quantify the gains from relaxing migration restrictions as well as to describe the evolution of the distribution of economic activity under different migration scenarios. Our results indicate that fully liberalizing migration would increase welfare about three-fold and would significantly affect the evolution of particular regions of the world.

Suggested Citation

  • Desmet, Klaus & Rossi-Hansberg, Esteban & Nagy, Dávid Krisztián, 2015. "The Geography of Development," CEPR Discussion Papers 10544, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10544
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    More about this item

    Keywords

    Development; Gains from mobility; Geography; Growth; Migration; Spatial economics; Trade; World economy;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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