Two essays on economic geography

Abstract

This dissertation consists of two chapters. The first chapter is co-authored with Chang Sun. In this chapter, we develop a quantitative spatial equilibrium model with endogenous migration and remittance decisions within households to examine the joint effect of migration and remittances on economic development. We apply the model to internal migration in China. Counterfactual analysis of the calibrated model shows that the presence of remittances increases migration and welfare, reduces regional inequality and facilitates structural change. Compared to a conventional single-person migration model, our household model suggests a larger reduction in regional inequality and stronger reallocation of employment from agriculture to manufacturing and services in response to the decline in migration costs over the period of 2000 to 2010. The second chapter studies the adoption of remote work and its effect on optimal spatial policies and subsidy competition among locations. I develop a quantitative spatial model with endogenous location and working mode choices, and commuters with different working modes contribute differently to the productivity externality. I characterize the first-best optimal policy in the presence of remote work and find that optimal allocations call for fewer subsidies to remote workers as work-from-home productivity increases. In contrast, local governments have a strong incentive to unilaterally subsidize remote workers to be their residents at the expense of the other locations. This finding highlights the potential loss from vying for remote workers.