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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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File URL: http://mpra.ub.uni-muenchen.de/9287/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9287.

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Date of creation: 27 Sep 2006
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Handle: RePEc:pra:mprapa:9287

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Keywords: economic geography; mutiple equilibria; forward-looking expectation; global stability; potential;

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References

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  1. Kaneda, Mitsuhiro, 2003. "Policy designs in a dynamic model of infant industry protection," Journal of Development Economics, Elsevier, Elsevier, vol. 72(1), pages 91-115, October.
  2. Gianmarco Ottaviano, 1996. "Monopolistic Competition, Trade and Endogenous Spatial Fluctuations," Working Papers 240, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(6), pages 696-713, November.
  4. Oyama, Daisuke & Takahashi, Satoru & Hofbauer, Josef, 2003. "Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics," MPRA Paper 6721, University Library of Munich, Germany.
  5. Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 617-50, May.
  6. Akihiko Matsui & Kiminori Matsuyama, 1990. "An Approach to Equilibrium Selection," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 970, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Gerhard SORGER, 1998. "Perfect Foresight and Equilibrium Selection in Symmetric Potential Games," Vienna Economics Papers, University of Vienna, Department of Economics 9802, University of Vienna, Department of Economics.
  8. Fukao, Kyoji & Benabou, Roland, 1993. "History versus Expectations: A Comment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(2), pages 535-42, May.
  9. 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.
  10. Oyama, Daisuke, 2002. "p-Dominance and Equilibrium Selection under Perfect Foresight Dynamics," Journal of Economic Theory, Elsevier, Elsevier, vol. 107(2), pages 288-310, December.
  11. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 483-99, June.
  12. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 31(1), pages 21-49, February.
  13. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 651-67, May.
  14. Sandholm, William H., 2001. "Potential Games with Continuous Player Sets," Journal of Economic Theory, Elsevier, Elsevier, vol. 97(1), pages 81-108, March.
  15. Monderer, Dov & Shapley, Lloyd S., 1996. "Potential Games," Games and Economic Behavior, Elsevier, Elsevier, vol. 14(1), pages 124-143, May.
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Citations

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Cited by:
  1. Tabuchi, Takatoshi & Thisse, Jacques-François & Zhu, Xiwei, 2014. "Technological Progress and Economic Geography," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9901, C.E.P.R. Discussion Papers.
  2. Berliant, Marcus & Kung, Fan-chin, 2009. "Bifurcations in regional migration dynamics," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(6), pages 714-720, November.
  3. 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, Elsevier, vol. 36(5), pages 754-778.
  4. Mossay, Pascal, 2013. "A theory of rational spatial agglomerations," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(2), pages 385-394.
  5. Anna Agliari & Pasquale Commendatore & Ilaria Foroni & Ingrid Kubin, 2014. "Expectations and industry location: a discrete time dynamical analysis," Decisions in Economics and Finance, Springer, Springer, vol. 37(1), pages 3-26, April.
  6. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(6), pages 696-713, November.
  7. Akamatsu, Takashi & Fujishima, Shota & Takayama, Yuki, 2014. "On Stable Equilibria in Discrete-Space Social Interaction Models," MPRA Paper 55938, University Library of Munich, Germany.
  8. 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, C.E.P.R. Discussion Papers 7063, C.E.P.R. Discussion Papers.
  9. Fujishima, Shota, 2013. "Growth, agglomeration, and urban congestion," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 37(6), pages 1168-1181.
  10. 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), Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS 201317, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

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