The global distribution of economic activity: nature, history, and the role of trade

J. Vernon Henderson, Tim Squires, Adam Storeygard and David Weil

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We explore the role of natural characteristics in determining the worldwide spatial distribution of economic activity, as proxied by lights at night, observed across 240,000 grid cells. A parsimonious set of 24 physical geography attributes explains 47% of worldwide variation and 35% of within-country variation in lights. We divide geographic characteristics into two groups, those primarily important for agriculture and those primarily important for trade, and confront a puzzle. In examining within-country variation in lights, among countries that developed early, agricultural variables incrementally explain over 6 times as much variation in lights as do trade variables, while among late developing countries the ratio is only about 1.5, even though the latter group is far more dependent on agriculture. Correspondingly, the marginal effects of agricultural variables as a group on lights are larger in absolute value, and those for trade smaller, for early developers than for late developers. We show that this apparent puzzle is explained by persistence and the differential timing of technological shocks in the two sets of countries. For early developers, structural transformation due to rising agricultural productivity began when transport costs were still high, so cities were localized in agricultural regions. When transport costs fell, these agglomerations persisted. In late-developing countries, transport costs fell before structural transformation. To exploit urban scale economies, manufacturing agglomerated in relatively few, often coastal, locations. Consistent with this explanation, countries that developed earlier are more spatially equal in their distribution of education and economic activity than late developers.

Keywords: agriculture; physical geography; development (search for similar items in EconPapers)
JEL-codes: O13 O18 R12 (search for similar items in EconPapers)
Date: 2018-02-01
New Economics Papers: this item is included in nep-agr, nep-evo, nep-geo, nep-gro and nep-int
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Citations: View citations in EconPapers (108)

Published in Quarterly Journal of Economics, 1, February, 2018, 133(1), pp. 357-406. ISSN: 0033-5533

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Related works:
Journal Article: The Global Distribution of Economic Activity: Nature, History, and the Role of Trade1 (2018)
Working Paper: The Global Spatial Distribution of Economic Activity: Nature, History and the Role of Trade (2016)
Working Paper: The global spatial distribution of economic activity:nature, history and the role of trade (2016)
Working Paper: The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade (2016)
Working Paper: The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:79709

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