Social optimality in the constructed-capital model

Stefan Wrzaczek ()

Central European Journal of Operations Research, 2014, vol. 22, issue 1, 232 pages

Abstract: In the constructed-capital model, the steady state is derived under the assumption that each individual behaves optimally. Contrasting to this decentralized approach, in this paper we derive the first-best outcome a central planner would choose. The results show that agglomeration is socially not optimal, irrespective of the level of trade barriers. Furthermore, the differences in the explicit solutions of both approaches are highlighted. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Maximum principle; Optimal control; Economic geography; Constructed-capital model social planner (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s10100-013-0285-8

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