What do recent advances in economic geography teach us about the spatial distribution of economic activity? We show that the equilibrium distribution of economic activity can be determined simply by the intersection of labor supply and demand curves. We discuss how to estimate these curves and highlight the importance of global geography—the connections between locations through the trading network—in determining how various policy relevant changes to geography shape the spatial economy.
We study the role of European Immigration on local and aggregate economic growth in the United States between 1880 and 1920. We employ a big data approach and link, at the individual-level, information from the Population Census, the universe of patents and millions of historical immigration records. We find that immigrants were more prolific innovators than natives, and document large differences in innovation potential across nationalities and regions in the United States. To measure the importance of immigrants for the creation of new ideas and economic growth, we develop a new spatial model of growth through dissemination of knowledge and workers’ mobility. The model allows us to use our micro and regional empirical findings to measure immigrants’ innovation human capital and the degree of knowledge diffusion which regulates scale effects. We quantitatively analyze the effects of imposing major immigration restrictions on American economic growth in the 19th and early 20th century. We find large, accumulating, losses from these restrictions. Both the scale effects and the exclusion of high-human capital immigrants contribute significantly to these losses.
We examine multi-product exporters and use firm-product-destination data to quantify export entry barriers. Our general-equilibrium model of multi-product firms generalizes earlier models. To match main facts about multi-product exporters, we estimate our model with rich demand and access cost shocks for Brazilian firms. The estimates document that additional products farther from a firm’s core competency incur higher unit costs, but face lower market access costs. We find that these market access costs differ across destinations and evaluate a scenario that standardizes market access between countries. The resulting welfare gains are similar to eliminating all current tariffs.