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Adjustment Costs and Long Run Spatial Agglomerations

Author

Listed:
  • William Brock

    (University of Wisconsin, Department of Economics, University of Missouri, Columbia)

  • Anastasios Xepapadeas

    (Athens University of Economics and Business Department of International and European Economic Studies)

  • Athanasios Yannacopoulos

    (Athens University of Economics and Business, Department of Statistics)

Abstract

We introduce knowledge spillovers as an externality in the production function of competitive firms operating in a finite spatial domain under adjustment costs. Spillovers are spatial as productive knowledge flows more easily among firms located nearby. When knowledge spillovers are not internalized by firms spatial agglomerations may emerge endogenously in a competitive equilibrium, however, they do not emerge at the steady state of the social optimum.

Suggested Citation

  • William Brock & Anastasios Xepapadeas & Athanasios Yannacopoulos, 2013. "Adjustment Costs and Long Run Spatial Agglomerations," Working Papers 2013.68, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2013.68
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    References listed on IDEAS

    as
    1. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-681, September.
    2. José Alexandre Scheinkman, 1978. "Stability of Separable Hamiltonians and Investment Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(3), pages 559-570.
    3. Brock, William A. & Xepapadeas, Anastasios & Yannacopoulos, Athanasios N., 2014. "Optimal agglomerations in dynamic economics," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 1-15.
    4. Maryann Feldman, 1999. "The New Economics Of Innovation, Spillovers And Agglomeration: Areview Of Empirical Studies," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 8(1-2), pages 5-25.
    5. Chincarini, Ludwig & Asherie, Neer, 2008. "An analytical model for the formation of economic clusters," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 252-270, May.
    6. Brock, William A, 1974. "Money and Growth: The Case of Long Run Perfect Foresight," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(3), pages 750-777, October.
    7. Stefano Breschi & Francesco Lissoni, 2001. "articles: Localised knowledge spillovers vs. innovative milieux: Knowledge "tacitness" reconsidered," Papers in Regional Science, Springer;Regional Science Association International, vol. 80(3), pages 255-273.
    8. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75(4), pages 321-321.
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    More about this item

    Keywords

    Investment Theory; Adjustment Costs; Spatial Agglomerations;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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