Asia's Geographic Development

Asian Development Review 34:2

24 Pages Posted: 25 Aug 2017

See all articles by Klaus Desmet

Klaus Desmet

Southern Methodist University (SMU); Centre for Economic Policy Research (CEPR)

David Krisztián Nagy

Princeton University

Esteban Rossi-Hansberg

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 23, 2017

Abstract

This paper studies the impact of spatial frictions on Asia’s long-term spatial development. Using the framework provided in Desmet, Nagy, and Rossi-Hansberg (2016), we analyze the evolution of Asia’s economy and the relative performance of specific regions and countries. We then perform a number of counterfactual experiments and find that a worldwide drop in transport costs of 40% increases the present discounted value of real income by 70.7% globally and 78% in Asia. These figures are much larger than those found in standard quantitative trade models because they include dynamic effects and take into account intracountry transport costs. We also perform exercises in which we upgrade Asia’s road network or relax migratory restrictions between locations in Asia. These exercises emphasize the important role of spatial frictions in the development of Asia’s economy.

Keywords: economic geography, economy of Asia, growth and development, international migration, quantitative trade models

JEL Classification: F11, F22, F43, O10, O40, O53, R42

Suggested Citation

Desmet, Klaus and Nagy, David Krisztián and Rossi-Hansberg, Esteban Alejandro, Asia's Geographic Development (August 23, 2017). Asian Development Review 34:2. Available at SSRN: https://ssrn.com/abstract=3025015

Klaus Desmet (Contact Author)

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David Krisztián Nagy

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Esteban Alejandro Rossi-Hansberg

Princeton University - Department of Economics ( email )

Princeton, NJ
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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