DP4138 The Origins of Spatial Interaction

Author(s): Wolfgang Keller, Carol Hua Shiue
Publication Date: December 2003
Keyword(s): 18th century china, coastal transport, geography, R40, river transport, spatial autocorrelation, spatial econometrics, trade, transport costs
JEL(s): F10, O10, R10
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4138

Geography shapes economic outcomes in a major way. This Paper uses spatial empirical methods to detect and analyse trade patterns in a historical dataset on Chinese rice prices. Our results suggest that spatial features were important for the expansion of interregional trade. Geography dictates, first, over what distances trade was possible in different regions, because the costs of ship transport were considerably below those for land transport. Spatial features also influence the direction in which a trading network is expanding. Moreover, our analysis captures the impact of new trade routes both within and outside the trading areas. We also discuss the long-run implications this might have.