Essays in Economic Geography

Abstract

This dissertation examines three aspects of how geography shapes the spatial distribution of economic activity, aggregate productivity, welfare, and growth. In the first chapter, I present a dynamic model to examine the relationship between spatial frictions, city formation, and aggregate development. In the model, a subset of locations endogenously specialize in innovative industries that are subject to scale economies. This leads to the formation and development of cities. Spatial frictions affect innovation, thus aggregate growth, by shaping the locations and sizes of cities. I take the model to historical U.S. data, and show that the model can quantitatively replicate the major patterns of 19th-century U.S. urban history. Then I quantify the effects of railroad construction and international trade on city formation and growth. Results indicate that railroads and trade were responsible for 23% and 1.4% of 19th-century U.S. growth, respectively.

The second chapter, coauthored with Klaus Desmet and Esteban Rossi-Hansberg, studies the relationship between geography and growth. We develop a dynamic spatial growth theory with realistic geography, and bring the model to data on the world economy. Then we quantify the gains from relaxing migration restrictions. Our results indicate that fully liberalizing migration would increase welfare more than three-fold and would significantly affect the evolution of particular regions in the world. We then use the model to study the effect of a rise in sea levels, and find that coastal flooding can have an important impact on welfare by changing the geographic-dynamic path of the world economy.

In the third chapter, I propose a model of economic geography to investigate the effect of border changes on the spatial distribution of population. I decompose the total effect into a standard "local effect" related to the change in distance from borders, and a novel "global effect" related to centrality before the border change. The global effect is especially strong in economies with a dominant central region that is home to a large fraction of the country's population. Conforming to this prediction, I show that the global effect played an important role in the population reallocation in Hungary after border changes in 1920.