Computer Simulation of Reallocating Resources among Growing Regions

Based on an approach presented by Buhr (2000), the computer simulation in this paper is concerned with the growth effects on the generation, distribution, and use of income. At first the private and public sectors, as well as the State, fix certain parameters which determine their behavior for the entire period under consideration. The simulation computes the results for a two-region model with respect to regional and national growth. The ensuing parameter variations reflect regional competition. The outcomes of the simulation runs are then used to determine an optimal behavior with respect to sectoral objectives. On the one hand, the private sectors try to increase an overall utility index which depends on the time path of consumption per capita; in this sense the private sectors compete for consumable and investment commodities. On the other hand, it is the task of the public sectors to supply public capital to the private sectors and to strengthen the productivity of labor by expenditure on education. Moreover, the public sectors may allocate subsidies to attract private capital from the other region. The means for raising public expenditure mainly include taxation of private income. According to this idea, the public sectors organize and determine the results of competition. Finally, the State imposes a tax on public income and reallocates these resources in order to improve the situation of one region or of both regions together. Now the State can be interpreted as an institution correcting the process of competition to some extent.