Railroads of the Raj Donaldson, Dave
The American economic review,
04/2018, Volume:
108, Issue:
4-5
Journal Article
Peer reviewed
Open access
How large are the benefits of transportation infrastructure projects, and what explains these benefits? This paper uses archival data from colonial India to investigate the impact of India’s vast ...railroad network. Guided by four results from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) increased real income levels; and (4) that a sufficient statistic for the effect of railroads on welfare in the model accounts well for the observed reduced-form impact of railroads on real income in the data.
RAILROADS AND AMERICAN ECONOMIC GROWTH Donaldson, Dave; Hornbeck, Richard
The Quarterly journal of economics,
05/2016, Volume:
131, Issue:
2
Journal Article
Peer reviewed
This article examines the historical impact of railroads on the U.S. economy, with a focus on quantifying the aggregate impact on the agricultural sector in 1890. Expansion of the railroad network ...may have affected all counties directly or indirectly—an econometric challenge that arises in many empirical settings. However, the total impact on each county is captured by changes in that county’s “market access,” a reduced-form expression derived from general equilibrium trade theory. We measure counties’ market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. We estimate that county agricultural land values increased substantially with increases in county market access, as the railroad network expanded from 1870 to 1890. Removing all railroads in 1890 is estimated to decrease the total value of U.S. agricultural land by 60%, with limited potential for mitigating these losses through feasible extensions to the canal network or improvements to country roads.
The past decade or so has seen a dramatic change in the way that economists can learn by watching our planet from above. A revolution has taken place in remote sensing and allied fields such as ...computer science, engineering, and geography. Petabytes of satellite imagery have become publicly accessible at increasing resolution, many algorithms for extracting meaningful social science information from these images are now routine, and modern cloud-based processing power allows these algorithms to be run at global scale. This paper seeks to introduce economists to the science of remotely sensed data, and to give a flavor of how this new source of data has been used by economists so far and what might be done in the future.
A large agronomic literature models the implications of climate change for a variety of crops and locations around the world. The goal of the present paper is to quantify the macro-level consequences ...of these micro-level shocks. Using an extremely rich micro-level data set that contains information about the productivity—both before and after climate change—of each of 10 crops for each of 1.7 million fields covering the surface of the earth, we find that the impact of climate change on these agricultural markets would amount to a 0.26 percent reduction in global GDP when trade and production patterns are allowed to adjust. Since the value of output in our 10 crops is equal to 1.8 percent of world GDP, this corresponds to about one-sixth of total crop value.
We develop a methodology to construct nonparametric counterfactual predictions, free of functional form restrictions on preferences and technology, in neoclassical models of international trade. ...First, we establish the equivalence between such models and reduced exchange models in which countries directly exchange factor services. This equivalence implies that, for an arbitrary change in trade costs, counterfactual changes in the factor content of trade, factor prices, and welfare only depend on the shape of a reduced factor demand system. Second, we provide sufficient conditions under which estimates of this system can be recovered nonparametrically. Together, these results offer a strict generalization of the parametric approach used in socalled gravity models. Finally, we use China's recent integration into the world economy to illustrate the feasibility and potential benefits of our approach.
The home-market effect, first hypothesized by Linder (1961) and later formalized by Krugman (1980), is the idea that countries with larger demand for some products at home tend to have larger sales ...of the same products abroad. In this article, we develop a simple test of the home-market effect using detailed drug sales data from the global pharmaceutical industry. The core of our empirical strategy is the observation that a country's exogenous demographic composition can be used as a predictor of the diseases that its inhabitants are most likely to die from and, in turn, the drugs they are most likely to demand. We find that the correlation between predicted home demand and sales abroad is positive and greater than the correlation between predicted home demand and purchases from abroad. In short, countries tend to be net sellers of the drugs they demand the most, as predicted by Linder (1961) and Krugman (1980).
COMPARATIVE ADVANTAGE AND OPTIMAL TRADE POLICY Costinot, Arnaud; Donaldson, Dave; Vogel, Jonathan ...
The Quarterly journal of economics,
05/2015, Volume:
130, Issue:
2
Journal Article
Peer reviewed
Open access
The theory of comparative advantage is at the core of neoclassical trade theory. Yet we know little about its implications for how nations should conduct their trade policy. For example, should ...import sectors with weaker comparative advantage be protected more? Conversely, should export sectors with stronger comparative advantage be subsidized less? In this article we take a first stab at exploring these issues. Our main results imply that in the context of a canonical Ricardian model, optimal import tariffs should be uniform, whereas optimal export subsidies should be weakly decreasing with respect to comparative advantage, reflecting the fact that countries have more room to manipulate prices in their comparative-advantage sectors. Quantitative exercises suggest substantial gains from such policies relative to simpler tax schedules.
Blending Theory and Data Donaldson, Dave
The Journal of economic perspectives,
07/2022, Volume:
36, Issue:
3
Journal Article
Peer reviewed
Open access
This article describes methods used in the field of spatial economics that combine insights from economic theory and evidence from data in order to answer counterfactual questions. I outline a ...general framework that emphasizes three elements: a specific question to be answered, a set of empirical relationships that can be identified from exogeneity assumptions, and a theoretical model that is used to extrapolate from such empirical relationships to the answer that is required. I then illustrate the application of these elements via a series of twelve examples drawn from the fields of international, regional, and urban economics. These applications are chosen to illustrate the various techniques that researchers use to minimize the theoretical assumptions that are needed to traverse the distance between identified empirical patterns and the questions that need to be answered.
How large are the gains from product market integration—or, equivalently, from a reduction in barriers to trade over space? This article surveys recent work on this question in the context of both ...international and intranational trade.
This article is based on a transcript of the Leonard K. Elmhirst Memorial Address, delivered at the 30th International Conference of Agricultural Economists in Vancouver, Canada, on July 29, 2018. ...The presentation provided an overview of work that I have done recently on comparative advantage and its role in agricultural trade patterns and trade‐driven changes in welfare. Two topics are addressed: (a) the static gains from intranational agricultural trade due to comparative advantage; and (b) how trade might mitigate consumption losses and food insecurity from changes in agricultural productivity caused by drought and climate change.
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