A large body of literature studies how infrastructure facilitates the movement of traded goods. We ask whether infrastructure also facilitates the movement of labor. We use a general equilibrium trade model and rich spatial data to explore the impact of a large plausibly exogenous shock to highways in Brazil on both goods markets and labor markets. We find that the road improvement increased welfare by 13.3%, of which 95% was due to reduced trade costs and 5% to reduced migration costs. Nevertheless, costly migration is responsible for large spatial heterogeneity in the benefits of roads: the interquartile range of welfare improvement is 6%–23%, as opposed to uniform gains with perfect mobility.
DATE: Friday, October 8, 2021
TIME: 3:30-5:00 p.m.
LOCATION: 444 Fronczak Hall, North Campus