The linear algebra of economic geography models

Benny Kleinman, Ernest Liu and Stephen Redding

CEP Occasional Papers from Centre for Economic Performance, LSE

Abstract: We provide sufficient statistics for nominal and real wage exposure to productivity shocks in a constant elasticity economic geography model. These exposure measures summarize the first-order general equilibrium elasticity of nominal and real wages in each location with respect to productivity shocks in all locations. They are readily computed using commonly available trade data and the values of trade and migration elasticities. They have an intuitive interpretation in terms of underlying economic mechanisms. Computing these measures for all bilateral pairs of locations involves a single matrix inversion and therefore remains computational efficient even with an extremely high-dimensional state space. These sufficient statistics provide theory-consistent measures of locations' exposure to productivity shocks for use in further economic and statistical analysis.

Keywords: economic geography; trade; migration (search for similar items in EconPapers)
Date: 2023-07-11
New Economics Papers: this item is included in nep-geo and nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cep.lse.ac.uk/pubs/download/occasional/op058.pdf (application/pdf)

Related works:
Journal Article: The Linear Algebra of Economic Geography Models (2024)
Working Paper: The Linear Algebra of Economic Geography Models (2023)
Working Paper: The Linear Algebra of Economic Geography Models (2023)
Working Paper: The Linear Algebra of Economic Geography Models (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:cepops:58

Access Statistics for this paper

More papers in CEP Occasional Papers from Centre for Economic Performance, LSE
Bibliographic data for series maintained by ().