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

Author

Listed:
  • Henri Busson

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

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.

Suggested Citation

  • Henri Busson, 2013. "Spatial Inequalities and Expectations: The Role of Heterogeneity in Krugman's Model," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201317, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  • Handle: RePEc:tut:cremwp:201317
    as

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    File URL: https://crem-doc.univ-rennes1.fr/wp/2013/201317.pdf
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    References listed on IDEAS

    as
    1. Kyoji Fukao & Roland Benabou, 1993. "History Versus Expectations: A Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 535-542.
    2. 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.
    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. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    5. Oyama, Daisuke, 2009. "History versus expectations in economic geography reconsidered," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 394-408, February.
    6. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 651-667.
    7. Ottaviano, Gianmarco I. P., 1999. "Integration, geography and the burden of history," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 245-256, March.
    8. 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.
    9. 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.
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    More about this item

    Keywords

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

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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