Jan David Bakker (Bocconi University)
We document a novel stylized fact: Using data for several countries, we show that export activity is disproportionately concentrated in larger cities – even more so than overall economic activity. We account for this fact by marrying elements of international trade and economic geography. We extend a standard Quantitative Spatial Economics (QSE) model to include heterogeneous firms that engage in selection along two margins: entry into cities of heterogeneous productivity and entry into exporting. The model allows us to study the implications of trade policy for within-country economic geography and of geographic policies for international trade. Our model delivers novel predictions for the bi-directional interactions between trade and urban dynamics: On the one hand, trade liberalization shifts employment towards larger cities and on the other hand, liberalizing land use increases international trade integration. We structurally estimate the model using data for the universe of Chinese and French manufacturing firms. We find that the effects of effects of trade liberalization and of urban policies are quantitatively different from those predicted by trade models that ignore economic geography, and by economic geography models that omit international trade (both of which are nested in our framework).
Jan David Bakker (Bocconi University, CEP and IFS) — Alvaro Garcia-Marin (Universidad de los Andes, Chile) — Andrei Potlogea (University of Edinburgh) — Nico Voigtländer (UCLA, NBER and CEPR) — Yang Yan (IMF)
Virtuall via Zoom
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