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Trade and the Topography of the Spatial Economy

Treb Allen and Costas Arkolakis ()

No 19181, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a versatile 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 differential equations which 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, amenities and the strength of spillovers in the United States. We find that geographic location accounts for 24% of the observed spatial distribution of income. Finally, we calculate that the construction of the interstate highway system increased welfare by 3.47%, roughly twice its cost.

JEL-codes: F10 O18 R12 R13 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-geo, nep-int and nep-ure
Note: DEV ITI
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Published as Treb Allen & Costas Arkolakis, 2014. "Trade and the Topography of the Spatial Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1085-1140.

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