Growth, Trade, and the Uneven Rise of Port Regions

Can spatially neutral productivity improvements have spatially non-neutral consequences? 

Across three major sources of countrywide productivity growth (increased internet penetration, vaccination campaigns, and improved access to schools), we document a consistent reallocation of economic activity toward port regions within countries. We rationalize these findings in a spatial model in which productivity growth increases export volumes, which in turn triggers a reduction in import costs through the round-trip effect, allowing port regions to attract economic activity. This prediction contrasts with a standard model with exogenous trade costs, in which spatially neutral productivity growth shifts economic activity toward interior regions that are more isolated from global markets. We calibrate our model and simulate it with and without the round-trip effect. 

Preliminary results suggest that the round-trip effect accounts for 15.6% of relative population growth in port regions and amplifies welfare gains from TFP growth by 24.1% in developing countries.