This paper provides evidence that domestic trade costs are a source of comparative advantage. First, I build an international trade and internal geography model with transportation features and input-output linkages. Then, I simulate how a large road project, Ruta del Sol, impacts the comparative advantage of Colombia. This road improves access to global markets for heterogeneous regions. My results show that the project shifts the comparative advantage of Colombia towards the manufacturing sector. Industry linkages reinforce this effect. Hence, I confirm that a country's comparative advantage is shaped materially by domestic trade costs, in addition to classical determinants like endowments, technology, and institutions.
The Geography of Commodity Booms
Economic Geography, Development Economics
This paper analyzes the impacts of a commodity boom in the spatial allocation of resources for the manufacturing sector. I contribute to the literature that explores the economic impacts of commodity booms on political outcomes and industrialization, by exploring the economic geography effects of commodity booms. I focus on three geographical aspects of commodity booms: the spatial allocation of production, the impacts on local manufacturing due to input-output linkages, and how domestic trade costs influence local economic impacts of commodity booms. My empirical findings indicate that industry linkages and domestic trade costs influence strongly the size and direction of the local economic impacts of commodity booms, a finding in line with the seminal work of Hirschman on the importance of industry linkages for the industrialization of countries dependent on the primary sector. My results provide evidence that it is necessary to take into consideration the factors related to the spatial and general equilibrium effects of commodity booms when evaluating the existence of a resource curse or a Dutch disease in a country.