Working Paper: NBER ID: w18008
Authors: Stephen J. Redding
Abstract: We develop a quantitative spatial model that incorporates a rich geography of trade and imperfect labor mobility between locations. We provide general results for the existence, uniqueness and comparative statics of the equilibrium. We show how the model can be used to undertake counterfactuals using only data in an initial equilibrium. In these counterfactuals, the welfare gains from trade depend on changes in both domestic trade shares and reallocations of population across locations. We show that factor mobility introduces quantitatively relevant differences in the counterfactual predictions of constant and increasing returns to scale models.
Keywords: Goods Trade; Factor Mobility; Welfare
JEL Codes: F11; F12; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reductions in trade costs (F12) | reallocations of population (R23) |
| reallocations of population (R23) | welfare gains from trade (F10) |
| reductions in trade costs (F12) | changes in economic activity (E39) |
| factor mobility (J62) | differences in counterfactual predictions (C53) |
| lower levels of factor mobility (F20) | larger average treatment effects for wages (J31) |
| lower levels of factor mobility (F20) | smaller effects for population and land prices (R23) |
| transport infrastructure improvements (R42) | economic impact (F69) |
| characteristics of locations (R30) | variation in average treatment effects of transport improvements (R41) |