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

Henri Busson
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Henri Busson: CREM CNRS, UMR 6211, University of Rennes 1, France

Economics Working Paper Archive (University of Rennes & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS

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.

Keywords: economic geography; location choice; equilibrium paths; linear differential systems (search for similar items in EconPapers)
JEL-codes: C62 J61 R12 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-geo and nep-ure
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