Álvaro García, Universidad de Los Andes

Sala 209

“Cities, Productivity and Trade”

Coautoreado con Andrei Potlogea, Nico Voiglander y Yang Yang

Abstract: 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 build a model with agglomeration economies where firms with heterogeneous productivity sort across city sizes and select into exporting. The model allows us to study the geographic implications of trade policy, as well as the international trade effects of place-based policies. We show that (i) weaker restrictions on housing supply increase not only the aggregate productivity of the economy but also its export intensity, by allowing more firms to locate in larger cities and profit from agglomeration effects; (ii) conversely, falling trade costs increase the fraction of the population that inhabits larger cities, where exporting firms tend to locate; (iii) when trade costs fall, the well-known process of reallocating resources to more efficient producers is slowed down by congestion in larger cities. We structurally estimate the model using data for the universe of Chinese manufacturing firms and study the general equilibrium effects of trade liberalization and of place-based policies. We find that the effects of these policies are quantitatively different from those predicted by trade models that ignore economic geography, and by economic geography models that omit international trade.