Optimal Transport Networks in Spatial Equilibrium
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Abstract:
We study optimal transport networks in spatial equilibrium. We develop a framework consisting of a neoclassical trade model with labor mobility in which locations are arranged on a graph. Goods must be shipped through linked locations, and transport costs depend on congestion and on the infrastructure in each link, giving rise to an optimal transport problem in general equilibrium. The optimal transport network is the solution to a social planner’s problem of building infrastructure in each link. We provide conditions such that this problem is globally convex, guaranteeing its numerical tractability. We also study cases with increasing returns to transport technologies in which global convexity fails. We apply the framework to assess optimal investments and inefficiencies in observed road networks in 25 European countries. The counterfactuals suggest larger gains from road network expansion and larger losses from misallocation of current roads in lower-income countries.
Date: 17 October 2017, 16:30 (Tuesday, 2nd week, Michaelmas 2017)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room G
Speaker: Edouard Schaal (CREI)
Organising department: Department of Economics
Part of: Macroeconomics Seminar
Booking required?: Not required
Audience: Members of the University only
Editors: Erin Saunders, Anne Pouliquen