Working Paper: NBER ID: w19697
Authors: A. Kerem Codu; Pablo D. Fajgelbaum
Abstract: We introduce an internal geography to the canonical model of international trade driven by comparative advantages to study the regional effects of external economic integration. The model features a dual-economy structure, in which locations near international gates specialize in export-oriented sectors while more distant locations do not trade with the rest of the world. The theory rationalizes patterns of specialization, employment, and relative incomes observed in developing countries that opened up to trade. We find regional specialization patterns consistent with the model in industry-level data from Chinese prefectures.
Keywords: International Trade; Regional Economics; Economic Integration
JEL Codes: F1; R1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher employment density in coastal regions (R23) | increased relative price of export industries (F14) |
| moving inland by 275 miles (R19) | decrease in employment by 17% for average export-oriented industries (F66) |
| higher export revenue ratios (F10) | more significant employment shrinkage (J63) |
| proximity to international gates (L93) | economic activity (E20) |
| international integration (F02) | migration of mobile factors to coastal regions (J61) |
| reduction in international or domestic trade costs (F19) | migration of mobile factors to coastal regions (J61) |
| reduction in trade costs (F12) | population density rise in coastal regions (R23) |
| reduction in trade costs (F12) | decrease in population density in interior regions (R23) |