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26 October 2007

The Origins of Spatial Interaction

Keller, Wolfgang & Shiue, Carol Hua, 2003.
"The Origins of Spatial Interaction,"
CEPR Discussion Papers
4138, C.E.P.R. Discussion Papers.

18th century china; coastal transport; geography; R40; river transport; spatial autocorrelation; spatial econometrics; trade; transport costs

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.

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