The next RITM Economics Seminar will take place on Monday 23 November, Online, from 11:00 to 12:00. Gabriel Loumeau (ETH Zurich) will present « Are Regional Borders Invisible ? ».
I study how regional borders affect surrounding economic activity. Spatial quasi-experimental variation around French departmental borders reveals discontinuous commuting and residential patterns. To tackle the endogenous border placement problem, I exploit a geometric border design proposed during the French Revolution. I then calibrate a spatial quantifiable general equilibrium framework to structurally match the quasi-experimental estimates. A 19km bilateral distance penalty when crossing local borders, induced by the decentralized planning and development of local transport networks, rationalizes well the observed discontinuities. Policy simulation shows that removing the penalty leads to a 9.5% median growth in local residential income.