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History versus expectations in economic geography reconsidered

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  • Oyama, Daisuke

Abstract

This paper studies global stability of spatial configurations in a dynamic two-region model with quadratic adjustment costs where rational migrants make migration decisions so as to maximize their discounted future utilities. A global analysis is conducted to show that, except for knife-edge cases with symmetric regions, there exists a unique spatial configuration that is absorbing and globally accessible whenever the degree of friction is sufficiently small, and such a configuration is characterized as the unique maximizer of the potential function of the underlying static model.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 2 (February)
Pages: 394-408

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:2:p:394-408

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Economic geography Multiple equilibria Forward-looking expectation Global stability Potential;

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References

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  1. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  2. Josef Hofbauer & Daisuke Oyama & Satoru Takahashi, 2004. "Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics," Econometric Society 2004 North American Winter Meetings 339, Econometric Society.
  3. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 696-713, November.
  4. Fukao, Kyoji & Benabou, Roland, 1993. "History versus Expectations: A Comment," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 535-42, May.
  5. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  6. Sandholm, William H., 2001. "Potential Games with Continuous Player Sets," Journal of Economic Theory, Elsevier, vol. 97(1), pages 81-108, March.
  7. Ottaviano, Gianmarco I. P., 2001. "Monopolistic competition, trade, and endogenous spatial fluctuations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 51-77, February.
  8. Matsui Akihiko & Matsuyama Kiminori, 1995. "An Approach to Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 65(2), pages 415-434, April.
  9. Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 617-50, May.
  10. Kaneda, Mitsuhiro, 2003. "Policy designs in a dynamic model of infant industry protection," Journal of Development Economics, Elsevier, vol. 72(1), pages 91-115, October.
  11. Josef HOFBAUER & Gerhard SORGER, 1998. "Perfect Foresight and Equilibrium Selection in Symmetric Potential Games," Vienna Economics Papers vie9802, University of Vienna, Department of Economics.
  12. Monderer, Dov & Shapley, Lloyd S., 1996. "Potential Games," Games and Economic Behavior, Elsevier, vol. 14(1), pages 124-143, May.
  13. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 21-49, February.
  14. Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December.
  15. Oyama, Daisuke, 2002. "p-Dominance and Equilibrium Selection under Perfect Foresight Dynamics," Journal of Economic Theory, Elsevier, vol. 107(2), pages 288-310, December.
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Citations

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Cited by:
  1. Takatoshi Tabuchi & Jacques-Fran�ois Thisse & Xiwei Zhu, 2014. "Technological Progress and Economic Geography," CIRJE F-Series CIRJE-F-915, CIRJE, Faculty of Economics, University of Tokyo.
  2. Anna Agliari & Pasquale Commendatore & Ilaria Foroni & Ingrid Kubin, 2014. "Expectations and industry location: a discrete time dynamical analysis," Decisions in Economics and Finance, Springer, vol. 37(1), pages 3-26, April.
  3. Fan-chin Kung, 2004. "Bifurcations in regional migration dynamics," Urban/Regional 0409008, EconWPA, revised 12 Sep 2004.
  4. Fujishima, Shota, 2013. "Growth, agglomeration, and urban congestion," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1168-1181.
  5. Fujita, Masahisa & Thisse, Jacques-François, 2008. "New Economic Geography: an appraisal on the occasion of Paul Krugman's 2008 Nobel Prize in Economics," CEPR Discussion Papers 7063, C.E.P.R. Discussion Papers.
  6. Akamatsu, Takashi & Fujishima, Shota & Takayama, Yuki, 2014. "On Stable Equilibria in Discrete-Space Social Interaction Models," MPRA Paper 55938, University Library of Munich, Germany.
  7. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 696-713, November.
  8. Mossay, Pascal, 2013. "A theory of rational spatial agglomerations," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 385-394.
  9. Henri Busson, 2013. "Spatial Inequalities and Expectations: The Role of Heterogeneity in Krugman's Model," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201317, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  10. Ikeda, Kiyohiro & Akamatsu, Takashi & Kono, Tatsuhito, 2012. "Spatial period-doubling agglomeration of a core–periphery model with a system of cities," Journal of Economic Dynamics and Control, Elsevier, vol. 36(5), pages 754-778.

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