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Spatial dynamics and convergence: The spatial AK model

Author

Listed:
  • Carmen Camacho

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Raouf Boucekkine

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Fabbri Giorgio

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

Abstract

We study the optimal dynamics of an AK economy where population is uniformly distributed along the unit circle. Locations only differ in initial capital endowments. Spatio-temporal capital dynamics are described by a parabolic partial differential equation. The application of the maximum principle leads to necessary but non-sufficient first-order conditions. Thanks to the linearity of the production technology and the special spatial setting considered, the value function of the problem is found explicitly, and the (unique) optimal control is identified in feedback form. Despite constant returns to capital, we prove that the spatio-temporal dynamics, induced by the willingness of the planner to give the same (detrended) consumption over space and time, lead to convergence in the level of capital across locations in the long-run.

Suggested Citation

  • Carmen Camacho & Raouf Boucekkine & Fabbri Giorgio, 2013. "Spatial dynamics and convergence: The spatial AK model," Post-Print hal-00973387, HAL.
    • Handle: RePEc:hal:journl:hal-00973387
    DOI: 10.1016/j.jet.2013.09.013
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    References listed on IDEAS

    as
    1. Boucekkine, Raouf & Camacho, Carmen & Zou, Benteng, 2009. "Bridging The Gap Between Growth Theory And The New Economic Geography: The Spatial Ramsey Model," Macroeconomic Dynamics, Cambridge University Press, vol. 13(1), pages 20-45, February.
    2. Faggian, Silvia & Gozzi, Fausto, 2010. "Optimal investment models with vintage capital: Dynamic programming approach," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 416-437, July.
    3. Brock, William & Xepapadeas, Anastasios, 2008. "General Pattern Formation in Recursive Dynamical Systems Models in Economics," MPRA Paper 12305, University Library of Munich, Germany.
    4. Silvia Faggian, 2008. "Maximum Principle for Boundary Control Problems Arising in Optimal Investment with Vintage Capital," Working Papers 181, Department of Applied Mathematics, Università Ca' Foscari Venezia.
    5. Fabbri, Giorgio & Gozzi, Fausto, 2008. "Solving optimal growth models with vintage capital: The dynamic programming approach," Journal of Economic Theory, Elsevier, vol. 143(1), pages 331-373, November.
    6. Klaus Desmet & Esteban Rossi‐Hansberg, 2010. "On Spatial Dynamics," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 43-63, February.
    7. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May.
    8. Paulo B. Brito, 2022. "The dynamics of growth and distribution in a spatially heterogeneous world," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 311-350, September.
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    More about this item

    Keywords

    Economic growth; Spatial dynamics; Optimal control; Partial differential equations;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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