Centre de Recerca en Economia Internacional
Universitat Pompeu Fabra
Ramon Trias Fargas, 23-25
NBER Working Papers and Publications
|February 2017||Optimal Transport Networks in Spatial Equilibrium|
with Pablo D. Fajgelbaum: w23200
We study optimal transport networks in spatial equilibrium. We develop a framework consisting of a neoclassical trade model with labor mobility in which locations are arranged on a graph. Goods must be shipped through linked locations, and transport costs depend on congestion and on the infrastructure in each link, giving rise to an optimal transport problem in general equilibrium. The optimal transport network is the solution to a social planner’s problem of building infrastructure in each link. We provide conditions such that this problem is globally convex, guaranteeing its numerical tractability. We also study cases with increasing returns to transport technologies in which global convexity fails. We apply the framework to assess optimal investments and inefficiencies in observed road ...
|March 2014||Uncertainty Traps|
with Pablo Fajgelbaum, Mathieu Taschereau-Dumouchel: w19973
We develop a theory of endogenous uncertainty and business cycles in which short-lived shocks can generate long-lasting recessions. In the model, higher uncertainty about fundamentals discourages investment. Since agents learn from the actions of others, information flows slowly in times of low activity and uncertainty remains high, further discouraging investment. The economy displays uncertainty traps: self-reinforcing episodes of high uncertainty and low activity. While the economy recovers quickly after small shocks, large temporary shocks may have long-lasting effects on the level of activity. The economy is subject to an information externality but uncertainty traps may remain in the efficient allocation. Embedding the mechanism in a standard business cycle framework, we find that en...
Published: Pablo D. Fajgelbaum & Edouard Schaal & Mathieu Taschereau-Dumouchel, 2017. "Uncertainty Traps*," The Quarterly Journal of Economics, vol 132(4), pages 1641-1692.