  Diffuse gamma-ray emission arising from interactions of cosmic rays with the
interstellar gas traces the densities of both of them throughout the Milky Way.
We discuss the results obtained from the analysis of Fermi LAT observations in
the region of Cassiopeia and Cepheus, towards the Perseus spiral arm. We find
that the gamma-ray emissivity of local gas is consistent with expectations
based on the cosmic-ray spectra measured at the Earth. The emissivity decreases
from the Gould Belt to the Perseus arm, but the measured gradient is flatter
than predictions by a propagation model based on a cosmic-ray source
distribution peaking in the inner Galaxy as suggested by pulsars. The
Xco=N(H2)/W(CO) conversion factor moderately increases by a factor ~2 from the
Gould Belt to the Perseus arm. The presence of additional gas not properly
traced by HI and CO surveys in the Gould Belt is suggested by the correlation
between gamma rays and thermal emission from cold interstellar dust.
