 Agglomeration under forward-looking expectations: Potentials and global stabilityRegional Science and Urban Economics, 2009, vol. 39, issue 6, 696-713 Abstract: This paper considers a class of migration dynamics with forward-looking agents in a multi-country solvable variant of the core-periphery model of Krugman [Krugman, P., 1991. Increasing returns and economic geography. Journal of Political Economy 99, 483-499]. We find that, under a symmetric externality assumption, our static model admits a potential function, which allows us to identify a stationary state that is uniquely absorbing and globally accessible under the perfect foresight dynamics whenever the degree of friction in relocation decisions is sufficiently small. In particular, when trade barriers are low enough, full agglomeration in the country with the highest barrier is the unique stable state for small frictions. New aspects in trade and tax policy that arise due to forward-looking behavior are discussed. Keywords: Economic; geography; Agglomeration; Perfect; foresight; dynamics; History; versus; expectations; Stability; Potential; game; Equilibrium; selection (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:39:y:2009:i:6:p:696-713 Access Statistics for this article Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou More articles in Regional Science and Urban Economics from Elsevier |
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