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Optimal Agglomerations in Dynamic Economics

Author

Listed:
  • William Brock
  • Anastasios Xepapadeas
  • Athanasios Yannacopoulos

Abstract

We study rational expectations equilibrium problems and social optimum problems in in nite horizon spatial economies in the context of a Ramsey type capital accumulation problem with geographical spillovers. We identify sufficient local and global conditions for the emergence (or not) of optimal agglomeration, using techniques from monotone operator theory and spectral theory in in nite dimensional Hilbert spaces. We show that agglomerations may emerge, with any type of returns to scale (increasing or decreasing) and with the marginal productivity of private capital increasing or decreasing with respect to the spatial externality. This is a fairly general result indicating the importance of the network structure of the spatial externality relative to the properties of the aggregate production function. Our analytical methods can be used to systematically study optimal potential agglomeration and clustering in dynamic economics.

Suggested Citation

  • William Brock & Anastasios Xepapadeas & Athanasios Yannacopoulos, 2014. "Optimal Agglomerations in Dynamic Economics," DEOS Working Papers 1403, Athens University of Economics and Business.
  • Handle: RePEc:aue:wpaper:1403
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    References listed on IDEAS

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    Cited by:

    1. William Brock & Anastasios Xepapadeas & Athanasios Yannacopoulos, "undated". "Adjustment Costs and Long Run Spatial Agglomerations," DEOS Working Papers 1327, Athens University of Economics and Business.
    2. Simon Levin & A. Xepapadeas, 2015. "Transboundary Capital and Pollution Flows and the Emergence of Regional Inequalities," Working Papers 2015.69, Fondazione Eni Enrico Mattei.
    3. Anastasios Xepapadeas & Athanasios Yannacopoulos & Andreas Ioannidis, 2014. "Spatial Growth: The Distribution of Capital across Locations when Saving Rates are Exogenous," DEOS Working Papers 1412, Athens University of Economics and Business.
    4. Xepapadeas, A. & Yannacopoulos, A.N., 2016. "Spatial growth with exogenous saving rates," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 125-137.
    5. Brock, William A. & Engström, Gustav & Grass, Dieter & Xepapadeas, Anastasios, 2013. "Energy balance climate models and general equilibrium optimal mitigation policies," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2371-2396.
    6. Javier de Frutos & Guiomar Martín-Herrán, 2016. "Pollution control in a multiregional setting: a differential game with spatially distributed controls," Gecomplexity Discussion Paper Series 201601, Action IS1104 "The EU in the new complex geography of economic systems: models, tools and policy evaluation", revised Jan 2016.

    More about this item

    Keywords

    Agglomeration; spatial spillovers; spillover induced instability; rational expectations equilibrium; social optimum; monotone operators.;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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