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Spatial externality and indeterminacy

Emmanuelle Augeraud-Véron and Arnaud Ducrot ()
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Arnaud Ducrot: LMAH - Laboratoire de Mathématiques Appliquées du Havre - ULH - Université Le Havre Normandie - NU - Normandie Université

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Abstract: We study conditions for existence and uniqueness of solutions in some space-structured economic models with long-distance interactions between locations. The solution of these models satisfies non local equations, in which the interactions are modeled by convolution terms. Using properties of the spectrum location obtained by studying the characteristic equation, we derive conditions for the existence and uniqueness of the solution. This enables us to characterize the degree of indeterminacy of the system being considered. We apply our methodology to a theoretical one-sector growth model with increasing returns, which takes into account technological interdependencies among countries that are modeled by spatial externalities. When symmetric interaction kernels are considered, we prove that conditions for which indeterminacy occurs are the same as the ones needed when no interactions are taken into account. For Gaussian kernels, we study the impact of the standard deviation parameter on the degree of indeterminacy. We prove that when some asymmetric kernels are considered, indeterminacy can occur with classical assumptions on supply and demand curves. © The authors. Published by EDP Sciences, 2019.

Keywords: Characteristic equation; Convolution; Economics; Existence and uniqueness; Existence and uniqueness of solution; Indeterminacy; Long distance interactions; Non-local equations; Spatial externalities; Standard deviation (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-geo and nep-ure
Note: View the original document on HAL open archive server: https://hal.science/hal-02306568
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Published in Mathematical Modelling of Natural Phenomena, inPress, 14 (1), 31 p. ⟨10.1051/mmnp/2019003⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02306568

DOI: 10.1051/mmnp/2019003

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