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ESTIMATING A DYNAMIC SPATIAL EQUILIBRIUM MODEL TO EVALUATE THE WELFARE IMPLICATIONS OF REGIONAL ADJUSTMENT PROCESSES: THE DECLINE OF THE RUST BELT
Author(s) -
Yoon Chamna
Publication year - 2017
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12224
Subject(s) - economics , welfare , general equilibrium theory , applied general equilibrium , inequality , rust (programming language) , aggregate (composite) , econometrics , macroeconomics , mathematics , mathematical analysis , materials science , computer science , market economy , composite material , programming language
This article develops and estimates a new dynamic spatial equilibrium model to study the regional transition dynamics and its impact on individual and aggregate welfare. The model consists of a multiregion, multisector economy comprised of overlapping generations of individuals with heterogeneous skills and mobility costs. The empirical findings suggest that a large fraction of the decline of the Rust Belt can be attributed to the reduction in its region‐specific comparative advantage in the goods‐producing sector. This decline generated significant differences in welfare across regions. Policy experiments show that such inequality can be significantly reduced through place‐based policies.