History versus Expectations in Economic Geography Reconsidered

Oyama, Daisuke (2006): History versus Expectations in Economic Geography Reconsidered. Unpublished.

Abstract

This paper studies global stability of spatial configurations in a dynamic two-region model with quadratic adjustment costs where rational migrants make migration decisions so as to maximize their discounted future utilities. A global analysis is conducted to show that, except for knife-edge cases with symmetric regions, there exists a unique spatial configuration that is absorbing and globally accessible whenever the degree of friction is sufficiently small, and such a configuration is characterized as the unique maximizer of the potential function of the underlying static model.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic geography; mutiple equilibria; forward-looking expectation; global stability; potential
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C61 - Optimization Techniques; Programming Models; Dynamic Analysis; R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C62 - Existence and Stability Conditions of Equilibrium

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