Goods Trade, Factor Mobility and Welfare

49 Pages Posted: 21 Apr 2012 Last revised: 17 Mar 2023

Date Written: April 2012

Abstract

We develop a quantitative spatial model that incorporates a rich geography of trade and imperfect labor mobility between locations. We provide general results for the existence, uniqueness and comparative statics of the equilibrium. We show how the model can be used to undertake counterfactuals using only data in an initial equilibrium. In these counterfactuals, the welfare gains from trade depend on changes in both domestic trade shares and reallocations of population across locations. We show that factor mobility introduces quantitatively relevant differences in the counterfactual predictions of constant and increasing returns to scale models.

Suggested Citation

Redding, Stephen J., Goods Trade, Factor Mobility and Welfare (April 2012). NBER Working Paper No. w18008, Available at SSRN: https://ssrn.com/abstract=2042993

Stephen J. Redding (Contact Author)

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/