Abstract
I study how and why economic activity varies around regional borders. Spatial quasi-experimental variation around French departmental borders reveals discontinuous commuting and residential patterns. To tackle the endogenous border placement problem, I exploit a geometric border design proposed during the French Revolution. I then calibrate a spatial quantifiable general equilibrium framework to structurally match the quasi-experimental estimates. The commuting and residential discontinuities are well explained by a 7km bilateral distance penalty when crossing regional borders, which is the consequence of the decentralized planning and development of local transport networks. Policy simulation shows that integrating local transport networks leads to a 11.7% average growth in real per capita residential income.
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