Optimal Transport Networks in Spatial Equilibrium

Pablo D. Fajgelbaum, Edouard Schaal

Research output: Contribution to journalArticle

1 Scopus citations

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 the road networks of European countries.

Original languageEnglish (US)
Pages (from-to)1411-1452
Number of pages42
JournalEconometrica
Volume88
Issue number4
DOIs
StatePublished - Jul 1 2020
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • economic geography
  • spatial equilibrium
  • Transport network

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