We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise revenue and is constrained by free mobility of labor across cities does not choose equal taxes...

We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise revenue and is constrained by free mobility of labor across cities does not choose equal taxes...

Equilibria and optima generally differ in imperfectly competitive markets. While this is well understood theoretically, it is unclear how large the welfare distortions are in the aggregate economy. Do they matter quantitatively? To answer this question, we develop a multi-sector monopolistic...

This paper uses a quasi-experimental study of a major bridge construction in Bangladesh to understand the effects of a large reduction in trade costs on the pattern of structural change and agricultural productivity. We develop a spatial general equilibrium model with a core and two hinterlands...

A few cities perform a high share of research and development (R&D) in the United States. If R&D generates local knowledge spillovers, then the social returns to R&D may vary across cities and the geographic distribution of researchers may be inefficient. Equally important, but less well...

In the two-country Melitz (2003) model, unilateral trade liberalization is often cast as a reduction of iceberg transportation costs and wages are determined by a linear outside sector. We show that welfare results reverse when wages adjust and trade frictions are revenue-generating tariffs. --...