The Footloose Entrepreneur Model with a Finite Number of Equidistant Regions
International Journal of Economic Theory (2018)
28 Pages Posted: 17 Feb 2018 Last revised: 26 Apr 2019
Date Written: December 1, 2017
We study the Footloose Entrepreneur model with a finite number of equidistant regions, focusing on the analysis of stability of three types of long-run equilibria: agglomeration, dispersion and partial dispersion. We find that, as the number of regions increases, there is more tendency for agglomeration and less tendency for dispersion. In the limit, as the number of regions tends to infinity, agglomeration becomes the unique stable equilibrium. Our conclusions are robust to any dependence of the total number of entrepreneurs and unskilled workers on the number of regions. Numerical evidence suggests that industry cannot disperse evenly among two regions when other regions have no industry. Finally, we introduce region heterogeneity in unskilled labour and obtain a more general condition for stability of agglomeration. We then study the impacts of regional asymmetries and find that having more unskilled workers in the core (or less in the periphery) increases the tendency for agglomeration.
Keywords: Core-Periphery, Footloose Entrepreneur, Finite number of Regions, Agglomeration
JEL Classification: R10, R12, R23
Suggested Citation: Suggested Citation