Empirical Explorations in Space

Diana Weinhold

EERC, May 2016

1. Internet and Trade(Freund and Weinhold 2002, 2004)

Conventional Wisdom: “Death of Distance”

a. Firms in B and C incur fixed costs to export to A.

b. Only some firms will export.

c. The optimal quantity any given firm exports depends on, among other things, the quantity supplied by other firms

The internet lowers the fixed costs of exporting

More firms from B and C will be able to export to A

But the overall increased quantity of exports reduces the optimal quantity for a firm, and changes in quantities by firms induces strategic quantity adjustments by other firms.

Firms that are further away and face higher transport costs will reduce quantity exported in the face of increased competition.

Firms that are closer have a strategic incentive to increase quantity.

Thus the importance of distance could increase.

Also: Increased internet in the importing country lowers fixed costs for all countries, so does not explain bilateral trade.Intuition: buying a rare book

with and without the internet.

2. Transport Costs and Brazilian Deforestation(Weinhold and Reis 2008, Andersen et al 2002)

Conventional wisdom: lowering transport costs (building roads) will increase deforestation.

Again, relative distance matters. If you decrease transport costs between A and C, the relative transport costs for B increases.

So total deforestation in the whole region may decrease.

- Unit of analysis matters a lot

“… in net terms, people in municipalities that have cleared their forests are not better-off than people in municipalities that have not.” - Rodrigues et al. Science 2009, p. 1436

3. Boom-Bust patterns in the Brazilian Amazon (weinhold et al 2015)Weinhold, Reis and Vale (2015)

Rodrigues et al. result: spurious artefact of spatial correlation