Trade and the topography of the spatial economy

Treb Allen, Costas Arkolakis

Research output: Contribution to journalArticlepeer-review

99 Scopus citations

Abstract

We develop a general equilibrium framework to determine the spatial distribution of economic activity on any surface with (nearly) any geography. Combining the gravity structure of trade with labor mobility, we provide conditions for the existence, uniqueness, and stability of a spatial economic equilibrium and derive a simple set of equations that govern the relationship between economic activity and the geography of the surface. We then use the framework to estimate the topography of trade costs, productivities and amenities in the United States. We find that geographic location accounts for at least twenty percent of the spatial variation in U.S. income. Finally, we calculate that the construction of the interstate highway system increased welfare by 1.1 to 1.4 percent, which is substantially larger than its cost. JEL Codes: R12, F10, R13, R40.

Original languageEnglish (US)
Article numberqju016
Pages (from-to)1085-1139
Number of pages55
JournalQuarterly Journal of Economics
Volume129
Issue number3
DOIs
StatePublished - Aug 1 2014

ASJC Scopus subject areas

  • Economics and Econometrics

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