Bridging the gap between growth theory and the new economic geography: the spatial Ramsey model
AbstractWe study a Ramsey problem in infinite and continuous time and space. The problem is discounted both temporally and spatially. Capital flows to locations with higher marginal return. We show that the problem amounts to optimal control of parabolic partial differential equations (PDEs). We rely on the existing related mathematical literature to derive the Pontryagin conditions. Using explicit representations of the solutions to the PDEs, we first show that the resulting dynamic system gives rise to an ill-posed problem in the sense of Hadamard (1923). We then turn to the spatial Ramsey problem with linear utility. The obtained properties are significantly different from those of the non-spatial linear Ramsey model due to the spatial dynamics induced by capital mobility.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006072.
Date of creation: 00 Sep 2006
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Ramsey model; economic geography; parabolic equations; optimal control;
Other versions of this item:
- Boucekkine, Raouf & Camacho, Carmen & Zou, Benteng, 2009. "Bridging The Gap Between Growth Theory And The New Economic Geography: The Spatial Ramsey Model," Macroeconomic Dynamics, Cambridge University Press, vol. 13(01), pages 20-45, February.
- Raouf Boucekkine & Carmen Camacho & Benteng Zou, 2006. "Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model," DEGIT Conference Papers c011_039, DEGIT, Dynamics, Economic Growth, and International Trade.
- Raouf, BOUCEKKINE & Carmen, CAMACHO & Benteng, ZOU, 2006. "Bridging the Gap between Growth Theory and the New Economic Geography : The Spatial Ramsey Model," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2006038, Université catholique de Louvain, Département des Sciences Economiques.
- Raouf Boucekkine & C. Camacho & B. Zou, 2007. "Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model," Working Papers 2007_27, Business School - Economics, University of Glasgow.
- BOUCEKKINE, Raouf & CAMACHO, Carmen & ZOU, Benteng, . "Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model," CORE Discussion Papers RP -2090, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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