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Spatial Inequalities and Expectations: The Role of Heterogeneity in Krugman's Model

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  • Henri Busson

    (CREM CNRS, UMR 6211, University of Rennes 1, France)

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    Abstract

    Heterogeneity has often changed the results of multiplicity and stability of equilibriums. In this article, we extend a paper written by Krugman by introducing two different types of workers with different productivity. This framework enables us to understand the weight of history in spatial inequalities, which are becoming more and more apparent in the united states and in europe. Krugman results don't holds and we find that even with high interest rates, history could be reversed and expectations could lead to a different equilibriums.

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    Bibliographic Info

    Paper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201317.

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    Date of creation: Jun 2013
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    Handle: RePEc:tut:cremwp:201317

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    Postal: CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France
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    Related research

    Keywords: economic geography; location choice; equilibrium paths; linear differential systems;

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    1. Fukao, Kyoji & Benabou, Roland, 1993. "History versus Expectations: A Comment," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 535-42, May.
    2. Ottaviano, Gianmarco Ireo Paolo & Thisse, Jacques-François, 1998. "Agglomeration and Trade Revisited," CEPR Discussion Papers 1903, C.E.P.R. Discussion Papers.
    3. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    4. G. P. I. Ottaviano, 1997. "Integration, Geography and the Burden of History," Working Papers 283, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels Across Cities," NBER Working Papers 11617, National Bureau of Economic Research, Inc.
    6. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
    7. Berry, Christopher R. & Glaeser, Edward L., 2005. "Divergence of Human Capital Levels across Cities," Working Paper Series rwp05-057, Harvard University, John F. Kennedy School of Government.
    8. Oyama, Daisuke, 2009. "History versus expectations in economic geography reconsidered," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 394-408, February.
    9. Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels across Cities," Harvard Institute of Economic Research Working Papers 2091, Harvard - Institute of Economic Research.
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