NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Goods Trade, Factor Mobility and Welfare

Stephen J. Redding

NBER Working Paper No. 18008
Issued in April 2012
NBER Program(s):   ITI

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.

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This paper was revised on December 12, 2014

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Document Object Identifier (DOI): 10.3386/w18008

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