AbstractWe develop a model economy adapting Hotelling's migration law to make individuals react to the gradient of their indirect utility. In a first version, individuals respond uniquely to utility differences. In a second phase, we insert our migration law as a dynamic constraint in a spatial model of economic growth in which a policy maker maximizes overall welfare. In both cases we prove the existence of a unique solution under certain assumptions and for each initial distribution of human capital. We illustrate some extremely interesting properties of the economy and the associated population dynamics through numerical simulations. In the decentralized case in which a region enjoys a temporal technological advantage, an agglomeration in human capital emerges in the central area, which does not coincide with the technologically advanced area. In the complete model, initial differences in human capital can trigger everlasting inequalities in physical capital.
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Date of creation: Feb 2013
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Migration; spatial dynamics; economic growth; parabolic PDE; optimal control;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-06 (All new papers)
- NEP-GEO-2013-04-06 (Economic Geography)
- NEP-MIG-2013-04-06 (Economics of Human Migration)
- NEP-URE-2013-04-06 (Urban & Real Estate Economics)
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