Working Paper: CEPR ID: DP10544
Authors: Klaus Desmet; David Krisztin Nagy; Esteban Rossi-Hansberg
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 toquantify 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.
Keywords: development; gains from mobility; geography; growth; migration; spatial economics; trade; world economy
JEL Codes: F1; F22; O1; O15; O18; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| removal of migration restrictions (F22) | increased welfare (I38) |
| migration restrictions (F22) | local market size (D49) |
| local market size (D49) | increased welfare (I38) |
| migration restrictions (F22) | innovation incentives (O31) |
| innovation incentives (O31) | increased welfare (I38) |
| migration restrictions (F22) | productivity levels (O49) |
| productivity levels (O49) | increased welfare (I38) |
| migration restrictions (F22) | economic outcomes (F61) |
| migration policies (F22) | economic productivity (O49) |
| migration policies (F22) | welfare gains (D69) |