Events

Prof. Lorenzo Caliendo
Won Park Hahn Professor of Global Affairs and Management and Professor of Economics
Yale School of Management and Jackson School of Global Affairs

We develop a dynamic spatial growth model to explore the role of trade and internal
migration in the process of spatial development and aggregate growth. We consider an
economy in which growth is shaped by the best global and local ideas that contribute
to the local stock of knowledge. Global ideas diffuse to locations that are more exposed
to international trade. Local ideas diffuse across space when workers move to another
location. We embed the diffusion of ideas through trade and migration into a dynamic
spatial framework with trade, forward-looking migration decisions, and capital accu-
mulation. We characterize the equilibrium properties of the model, prove uniqueness
of the balanced growth path, and show how to take the model to the data to conduct
counterfactual analysis. As an application, we study China’s spatial and aggregate
growth during the 1990s and 2000s. We find that international trade and internal mi-
gration are important mechanisms for idea diffusion that contributed to China’s spatial
and aggregate growth, with heterogeneous effects across space. Using patent data we
provide further evidence of idea diffusion through trade and migration.