Optimal Spatial Reallocation

by Cecile Gaubert & Pablo Fajgelbaum (UCLA)

For a draft of the paper, see here.

The geographic distribution of economic activity within a country is an equilibrium object that balances agglomeration and congestion forces, and, by doing so, determines aggregate productivity and welfare. In this project, we ask: from the perspective of aggregate welfare, is this equilibrium efficient? Given an observed spatial equilibrium, what is the optimal spatial reallocation that leads to maximize welfare, and how can a federal planner implement this spatial reallocation?

See poster.