We develop a general equilibrium framework to determine the spatial distribution of economic activity on any surface with (nearly) any geography. Combining the gravity structure of trade with labor mobility, we provide conditions for the existence, uniqueness, and stability of a spatial economic equilibrium and derive a simple set of equations that govern the relationship between economic activity and the geography of the surface. We then use the framework to estimate the topography of trade costs, productivities and amenities in the United States. We find that geographic location accounts for at least twenty percent of the spatial variation in U.S. income. Finally, we calculate that the construction of the interstate highway system increased welfare by 1.1 to 1.4 percent, which is substantially larger than its cost.

It is costly to learn about market conditions elsewhere, especially in developing countries. This paper examines how such information frictions affect trade. Using data on regional agricultural trade in the Philippines, I first document a number of observed patterns in trade flows and prices that suggest the presence of information frictions. I then incorporate information frictions into a perfect competition trade model by embedding a process whereby heterogeneous producers engage in a costly sequential search process to determine where to sell their produce. I show that introducing information frictions reconciles the theory with the observed patterns in the data. Structural estimation of the model finds that information frictions are quantitatively important: roughly half the observed regional price dispersion is due to information frictions. Furthermore, incorporating information frictions improves the out‐of‐sample predictive power of the model.

for their helpful suggestions and comments. Li Xiangliang provided excellent research assistance. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w19181.ack NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We develop a general equilibrium geographic framework to characterize the welfare effect of transportation infrastructure investments. We tackle three distinct but conflating challenges: First, we offer an analytical characterization of the routing problem and, in particular, how infrastructure investment between any two connected locations decreases the total trade costs between all pairs of locations. Second, we characterize how this cost reduction affects welfare within a standard general equilibrium geography setup where market inefficiencies arise due to agglomeration and dispersion spillovers. Finally, we show how our framework admits analytical characterizations of traffic congestion, which creates a critical-albeit tractable-feedback loop between trade costs and the general equilibrium economic system. We apply these results to calculate the welfare effects of improving each of the thousands of segments of the U.S. national highway network. We find large but heterogeneous welfare effects, with the largest gains concentrated in metropolitan areas and along important trading corridors.

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