TY - JOUR
T1 - Trade and the topography of the spatial economy
AU - Allen, Treb
AU - Arkolakis, Costas
N1 - Publisher Copyright:
© The Author(s) 2014. All rights reserved.
PY - 2014/8/1
Y1 - 2014/8/1
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=84911462070&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84911462070&partnerID=8YFLogxK
U2 - 10.1093/qje/qju016
DO - 10.1093/qje/qju016
M3 - Article
AN - SCOPUS:84911462070
SN - 0033-5533
VL - 129
SP - 1085
EP - 1139
JO - Quarterly Journal of Economics
JF - Quarterly Journal of Economics
IS - 3
ER -