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How Large Are the Gains from Economic Integration? Theory and Evidence from U.S. Agriculture, 1880-1997

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  • Arnaud Costinot
  • Dave Donaldson

Abstract

In this paper we develop a new approach to measuring the gains from economic integration based on a generalization of the Ricardian model in which heterogeneous factors of production are allocated to multiple sectors in multiple local markets based on comparative advantage. We implement this approach using data on crop markets in approximately 2,600 U.S. counties from 1880 to 1997. Central to our empirical analysis is the use of a novel agronomic data source on predicted output by crop for small spatial units. Crucially, this dataset contains information about the productivity of all units for all crops, not just those that are actually being grown—an essential input for measuring the gains from trade. Using this new approach we find substantial long-run gains from economic integration among US agricultural markets, benefits that are similar in magnitude to those due to productivity improvements over that same period.

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  • Arnaud Costinot & Dave Donaldson, 2016. "How Large Are the Gains from Economic Integration? Theory and Evidence from U.S. Agriculture, 1880-1997," NBER Working Papers 22946, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22946
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    22. Calil, Yuri Clements Daglia & Ribera, Luis A., 2020. "EU–Mercosur Free Trade Agreement: Implications for Agriculture," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304548, Agricultural and Applied Economics Association.
    23. Bruno Morando, 2021. "Market access and inefficient cropping patterns in Uganda," Economics Department Working Paper Series n309-21.pdf, Department of Economics, National University of Ireland - Maynooth.
    24. Jason Query, 2020. "Differing trade elasticities for intra‐ and international distances: A gravity approach," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 913-929, August.
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    JEL classification:

    • F0 - International Economics - - General
    • F1 - International Economics - - Trade
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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