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Trade and Geography

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  • Stephen J. Redding
Abstract
This paper reviews recent research on geography and trade. One of the key empirical findings over the last decade has been the role of geography in shaping the distributional consequences of trade. One of the major theoretical advances has been the development of quantitative spatial models that incorporate both exogenous first-nature geography (natural endowments) and endogenous second-nature geography (the location choices of economic agents relative to one another) as determinants of the distribution of economic activity across space. These models are sufficiently rich to capture first-order features of the data, such as gravity equations for flows of goods and people. Yet they remain sufficiently tractable as to permit an analytical characterization of the properties of the general equilibrium and facilitate counterfactuals for realistic policy interventions. We distinguish between models of regions or systems of cities (where goods trade and migration take center stage) and models of the internal structure of cities (where commuting becomes relevant). We review some of key empirical predictions of both sets of theories and show that they have been remarkably successful in rationalizing the empirical findings from reduced-form research. Looking ahead, the combination of recent theoretical advances and novel geo-coded data on economic interactions at a fine spatial scale promises many interesting avenues for further research, including discriminating between alternative mechanisms for agglomeration, understanding the implications of new technologies for the organization of work, and assessing the causes, consequences and potential policy implications of spatial sorting.

Suggested Citation

  • Stephen J. Redding, 2020. "Trade and Geography," NBER Working Papers 27821, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27821
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    2. Rui Costa & Swati Dhingra & Stephen Machin, 2022. "New dawn fades: Trade, labour and the Brexit exchange rate depreciation," CEP Discussion Papers dp1890, Centre for Economic Performance, LSE.
    3. David Autor & David Dorn & Gordon Hanson, 2021. "On the Persistence of the China Shock," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 52(2 (Fall)), pages 381-476.
    4. Escaith, Hubert, 2022. "From Hyper-globalization to Global Value Chains Decoupling: Withering Global Trade Governance?," MPRA Paper 115267, University Library of Munich, Germany.
    5. Jakob Engel & Deeksha Kokas & Gladys Lopez-Acevedo & Maryla Maliszewska, 2021. "The Distributional Impacts of Trade," World Bank Publications - Books, The World Bank Group, number 35552.
    6. Andrés Rodríguez-Clare & Mauricio Ulate & José P. Vásquez, 2020. "Trade with Nominal Rigidities: Understanding the Unemployment and Welfare Effects of the China Shock," NBER Working Papers 27905, National Bureau of Economic Research, Inc.
    7. Elena Perra, & Sanfilippo, Marco & Sundaram, Asha, 2022. "Roads, Competition, and the Informal Sector," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202221, University of Turin.
    8. Brooks, Leah & Gendron-Carrier, Nicolas & Rua, Gisela, 2021. "The local impact of containerization," Journal of Urban Economics, Elsevier, vol. 126(C).
    9. Gehr, Katja & Pflüger, Michael P., 2023. "The Worth of Cities in Germany," IZA Discussion Papers 16127, Institute of Labor Economics (IZA).
    10. Anna-Theresa Renner & Dieter Pennerstorfer, 2020. "Modeling inter-regional patient mobility: Does distance go far enough?," Economics working papers 2020-04, Department of Economics, Johannes Kepler University Linz, Austria.
    11. Lindgren, Erik & Pettersson-Lidbom, Per & Tyrefors, Björn, 2021. "The Causal Effect of Transport Infrastructure: Evidence from a New Historical Database," Working Paper Series 1407, Research Institute of Industrial Economics.
    12. Krebs, Oliver & Pflüger, Michael, 2023. "On the road (again): Commuting and local employment elasticities in Germany," Regional Science and Urban Economics, Elsevier, vol. 99(C).
    13. Elena Perra, 2022. "Road to Division: Ethnic Favouritism in the Provision of Road Infrastructure in Ethiopia," Working Papers - Economics wp2022_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    14. Björn Thor Arnarson & Joakim Gullstrand, 2022. "Linking local services to global manufactures," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(1), pages 3-34, January.
    15. Wim Naudé & Martin Cameron, 2021. "Export-Led Growth after COVID-19: The Case of Portugal," Notas Económicas, Faculty of Economics, University of Coimbra, issue 52, pages 7-53, July.
    16. Fiorini, Matteo & Sanfilippo, Marco & Sundaram, Asha, 2021. "Trade liberalization, roads and firm productivity," Journal of Development Economics, Elsevier, vol. 153(C).

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    JEL classification:

    • F1 - International Economics - - Trade
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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