https://macropaperwarehouse.com/authors/rodrigo-adao/Rodrigo AdãoHugo -- gohugo.ioen-usThu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/general-equilibrium-effects-in-space-theory-and-measurement/Thu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/general-equilibrium-effects-in-space-theory-and-measurement/<p>How do international trade shocks propagate through spatially connected regional labor markets, and how large are the general equilibrium effects that standard shift-share specifications miss? Adão, Arkolakis, and Esposito address this question by extending shift-share empirical designs to incorporate general equilibrium (GE) effects arising from spatial links between markets. Their motivation is that the difference-in-difference logic of standard shift-share regressions recovers only the differential response of treated versus control regions, not the level response that includes indirect (spillover) effects propagating through trade, labor supply, and agglomeration links. Ignoring these indirect effects biases estimates of trade shocks&rsquo; aggregate labor market consequences.</p>