This paper shows that greater global spatial correlation of productivities can increase cross-country welfare dispersion by increasing the correlation between a country’s productivity and its gains from trade. We causally validate this general-equilibrium prediction using a global climatic phenomenon as a natural experiment. We find that gains from trade in cereals over the last half-century were larger for more productive countries and smaller for less productive countries when cereal productivity was more spatially correlated. Incorporating this general-equilibrium effect into a projection of climate-change impacts raises projected international inequality, with higher welfare losses across most of Africa.

More Research From These Scholars

BFI Working Paper May 26, 2020

Spatial Economics for Granular Settings

Jonathan Dingel, Felix Tintelnot
BFI Working Paper Apr 18, 2020

Childcare Obligations Will Constrain Many Workers When Reopening the US Economy

Jonathan Dingel, Christina Patterson, Joseph S. Vavra
Topics:  COVID-19
White Paper Jun 19, 2020

How Many Jobs Can be Done at Home?

Jonathan Dingel, Brent Neiman
Topics:  Employment & Wages, COVID-19