Equilibrium Dynamics in a Model of Growth and Spatial Agglomeration
51 Pages Posted: 17 Dec 2018 Last revised: 12 Apr 2021
Date Written: April 8, 2021
Abstract
We present a multi-regional endogenous growth model in which forward-looking agents choose their regions to live in, in addition to consumption and capital accumulation paths. The spatial distribution of economic activity is determined by the interplay between production spillover effects and urban congestion effects. We characterize the global stability of the spatial equilibrium states in terms of economic primitives such as agents' time preference and intra- and inter-regional spillovers. We also study how macroeconomic variables at the stable equilibrium state behave according to the structure of the spillover network.
Keywords: Growth, Agglomeration, Continuous-Time Overlapping Generations, Perfect Foresight Dynamics, Potential Function, Spillover Network
JEL Classification: C62, C73, D62, O41, R13
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