Markups and proximity to transport infrastructures

With this project, I am building from the literature on the raise of market power across space and the one about the competitive effects of trade and market access, to analyze a novel dimension leading to spatial heterogeneity in markups, coming from proximity to transport infrastructures and trade with other regions. More specifically, my hypothesis is that larger firms,that active not only in the local market, would benefit disproportionately by locating their production plants in proximity to transport infrastructures. The project will have two main sections : in the first part I will present a theoretical framework in the form of a quantitative spatial general equilibrium model featuring sorting of heterogenous firms across locations,trade between regions and endogenous markups. In the second part I will provide empirical evidence of the main mechanisms in place and I will establish a causal relationship between proximity to transport infrastructures, firm size and price markups.

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