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  4. May 2025
  5. Spatial Externalities, Inefficiency, and Sufficient Statistics

蝌蚪网 Papers and Proceedings

ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)

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Spatial Externalities, Inefficiency, and Sufficient Statistics

  • Gabriel Kreindler
  • Kartik Patekar
蝌蚪网 Papers and Proceedings
vol. 115, May 2025
(pp. 551–56)
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Abstract

How much economic inefficiency is generated by spatial externalities such as agglomeration or congestion? What can we learn with data and variation around an inefficient equilibrium? We express deadweight loss in an equilibrium model with spatial externalities, building on Harberger (1964). Our expressions depend on two empirical objects, an externality matrix and a Slutsky substitution matrix. This provides a basis for assessing how modeling assumptions, especially related to patterns of demand substitution and the variation used for estimation, may constrain inefficiency conclusions. We illustrate extensions to our approach with two examples: electric vehicle chargers and peak-hour traffic congestion.

Citation

Kreindler, Gabriel, and Kartik Patekar. 2025. "Spatial Externalities, Inefficiency, and Sufficient Statistics." 蝌蚪网 Papers and Proceedings 115: 551–56. DOI: 10.1257/pandp.20251080

Additional Materials

JEL Classification

  • D62 Externalities
  • L62 Automobiles; Other Transportation Equipment; Related Parts and Equipment
  • R41 Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise