Working Paper: CEPR ID: DP13861
Authors: Edouard Schaal; Pablo Fajgelbaum
Abstract: We study optimal transport networks in spatial equilibrium. We develop a framework consisting of a neoclassical trade model with labor mobility in which locations are arranged on a graph. Goods must be shipped through linked locations, and transport costs depend on congestion and on the infrastructure in each link, giving rise to an optimal transport problem in general equilibrium. The optimal transport network is the solution to a social planner's problem of building infrastructure in each link. We provide conditions such that this problem is globally convex, guaranteeing its numerical tractability. We also study cases with increasing returns to transport technologies in which global convexity fails. We apply the framework to assess optimal investments and inefficiencies in observed road networks in European countries.
Keywords: Optimal Transport Networks; Spatial Equilibrium; Infrastructure Investments
JEL Codes: F11; O18; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| infrastructure investments (H54) | economic outcomes (F61) |
| optimal transport networks (R42) | spatial distribution of prices (R32) |
| optimal transport networks (R42) | real incomes (E25) |
| optimal transport networks (R42) | trade flows (F10) |
| optimal expansion of road networks (R42) | welfare gains (D69) |
| misallocation of roads (R42) | welfare losses (D69) |
| optimal infrastructure investments (H54) | regional inequalities in real consumption (R22) |
| changes in trade costs (F12) | economic impacts (F69) |
| congestion (L91) | transport costs (L91) |
| optimal network configurations (D85) | economic efficiency (D61) |