Trade and Urbanization: Evidence from Hungary

Dávid Krisztián Nagy

American Economic Journal: Microeconomics, 2022, vol. 14, issue 3, 733-90

Abstract: I study how trade affects urbanization and real income. To this end, I exploit large-scale exogenous changes in trade stemming from the redrawing of Hungary's borders after the First World War. I show that urbanization in counties near the new border decreased significantly relative to counties farther away. I rationalize this reduced-form finding in a spatial model in which benefits from trading drive agglomeration around locations where trading activity takes place. Structurally estimating the model, I find a 15.55 percent decrease in Hungarian residents' average real income after the redrawing of borders, with the largest losses concentrated in border regions.

JEL-codes: F11 F14 N34 N74 N94 R12 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1257/mic.20180270

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