The Emergence of Optimal Agglomeration in Dynamic Economics
William Brock and
Anastasios Xepapadeas ()
No 1011, DEOS Working Papers from Athens University of Economics and Business
We analyze endogenous pattern formation resulting from forward-looking optimizing behavior of economic agents in the presence of spatial spillovers modelled by continuous kernels. We use Fourier methods to identify nec- essary and suÃƒï¿½Ã‚Â¢ cient conditions for the emergence of optimal agglomeration through an optimal spillover induced instability of a spatially homogeneous steady state. We apply our methods to study the emergence of optimal ag- glomeration for a rational expectations equilibrium and an optimal growth model. We believe that our analytical methods can be used to systematically study optimal agglomeration and clustering in dynamic economics.
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