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Dynamic spatial general equilibrium

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  • Kleinman, Benny
  • Liu, Ernest
  • Redding, Stephen J.

Abstract

We develop a dynamic spatial general equilibrium model with forward-looking investment and migration decisions. We characterize analytically the transition path of the spatial distribution of economic activity in response to shocks. We apply our framework to the re-allocation of US economic activity from the Rust Belt to the Sun Belt from 1965-2015. We find slow convergence to steady-state, with US states closer to steady-state at the end of our sample period than at its beginning. We find substantial heterogeneity in the effects of local shocks, which depend on capital and labor dynamics, and the spatial and sectoral incidence of these shocks.

Suggested Citation

  • Kleinman, Benny & Liu, Ernest & Redding, Stephen J., 2021. "Dynamic spatial general equilibrium," LSE Research Online Documents on Economics 113917, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:113917
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    1. Dynamic spatial general equilibrium
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    More about this item

    Keywords

    spatial dynamics; economic geography; trade; migration;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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