Spatial Development and Mobility Frictions in Latin America : Theory-Based Empirical Evidence
Using fine-grained spatial data and a dynamic spatial general equilibrium model, this paper assesses the magnitude of mobility frictions in Latin America as well as the effects of their reduction on spatial development in the region. The results su...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099231306012226724/IDU040ec395c03220048480a53f05f73d2054bb7 http://hdl.handle.net/10986/37497 |
| Summary: | Using fine-grained spatial data and a
dynamic spatial general equilibrium model, this paper
assesses the magnitude of mobility frictions in Latin
America as well as the effects of their reduction on spatial
development in the region. The results suggest that in most
Latin American countries, migration frictions calibrated
based on spatially differentiated initial utility are on
average smaller and less dispersed than those obtained
assuming uniform within-country initial utility. A reduction
in trade costs due to optimal investments in road
infrastructure in most Latin American countries increases
the present discounted value of real per capita income on
average in the region by 15.1 percent. This effect is larger
than the effects obtained with static quantitative trade
models because of substantial dynamic gains. By contrast, a
reduction in migration entry costs in the most productive
and more populous locations in the Latin American countries
has a negligible effect on the present discounted value of
the region’s real per capita income, reflecting the
relatively small dispersion in domestic migration frictions
and their relatively low levels in top locations. In both
counterfactuals, the welfare increases are significantly
larger than the increases in real per capita output because
the reductions in mobility frictions allow people to
relocate to areas with better amenities and therefore derive
higher utility. These results suggest that trade costs, not
migration barriers, represent a major constraint to the
efficient spatial distribution of economic activity and
growth in Latin America. |
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