Working Paper: NBER ID: w23200
Authors: Pablo D. Fajgelbaum; Edouard Schaal
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: No keywords provided
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 |
|---|---|
| Optimal infrastructure investments (H54) | Reduced trade costs (F19) |
| Reduced trade costs (F19) | Increased economic efficiency (D61) |
| Reduced trade costs (F19) | Increased welfare across regions (D69) |
| Improved infrastructure (H54) | Decreased congestion costs (L91) |
| Decreased congestion costs (L91) | Reduced overall trade costs (F19) |
| Reallocating infrastructure investments (H54) | Significant welfare gains (D69) |
| Optimal expansion of roads (R42) | Reduced regional inequalities in real consumption (F62) |
| Reduced regional inequalities in real consumption (F62) | Diminished dispersion in marginal utility of consumption (D11) |