The geography of development

Desmet, Klaus; Nagy, David Krisztián; Rossi-Hansberg, Esteban

doi:http://dx.doi.org/10.1086/697084

The geography of development

Citation

Desmet K, Nagy D, Rossi-Hansberg E. The geography of Development. Journal of Political Economy. 2018;126(3):903-83. DOI 10.1086/697084

Abstract

We develop a dynamic spatial growth theory with realistic geography. We characterize the model and its balanced-growth path and propose a methodology to analyze equilibria with different levels of migration frictions. Different migration scenarios change local market size, innovation incentives, and the evolution of technology. We bring the model to the data for the whole world economy at a 1° × 1° geographic resolution. We then use the model to quantify the gains from relaxing migration restrictions. Our results indicate that fully liberalizing migration would increase welfare about threefold and would significantly affect the evolution of particular regions of the world.