UCLA

This dissertation examines questions in trade and spatial economics. The first chapter studies how changes in domestic trade costs can cause regions to decline. The agriculture-intensive states of the American Midwest (the ``heartland") lost population relative to the rest of the country over the postwar period; at the same time, the price of shipping agricultural relative to manufactured goods fell considerably. I outline a simple version of a trade model and derive comparative statics of the price, production, and population effects of a decline in agricultural shipping costs to show how these two facts may be linked. I validate the model's predictions by studying how a 1963 Supreme Court ruling that sharply reduced the cost of shipping wheat versus flour affected the flour milling industry. Finally, I calibrate a multi-sector, multi-location version of the model to the U.S. in 1950 and find that observed declines in agricultural trade costs can explain nearly 10% of the postwar population decline in the heartland. The second chapter is joint work with Pablo Fajgelbaum, Cecile Gaubert, Eduardo Morales, and Edouard Schaal and studies the political economy of transportation investments. Transport networks are among the largest investments made by federal and local governments. What determines which projects are implemented? We study how people's political preferences and policymakers' preferences for redistribution or popular approval determined the implementation of California's High-Speed Rail. We combine detailed spatial data on votes for the project with a quantitative spatial model that captures its economic benefits and use our framework to estimate the weight of economic and political components in transport users' preferences. We find that votes are responsive to the expected real-income benefits of the high-speed rail but that economic benefits explain only a small fraction of the aggregate vote and the variance in welfare across space is almost entirely explained by non-economic factors. The third and final chapter, joint with Elena Ianchovichina, uses a spatial general equilibrium framework to construct optimal transport networks and optimal expansions to existing networks in most Latin American countries, as well as within MERCOSUR and the Andean Community. The average annual welfare losses due to inefficient domestic transport networks in Latin America are around 1.6%, ranging from 2.4% in Argentina to 0.3% in El Salvador. Spatial misallocation of transnational transport networks is associated with annual welfare losses of 1.8% in MERCOSUR and 1.5% in the Andean Community. The optimal investments we identify correlate relatively well with World Bank infrastructure projects because both prioritize investments in high population areas. Optimal investments in transnational road networks benefit the least developed country in each trade bloc most.