The diffusion of economic activity across space: a new approach

Carmen Camacho () and Agustín Pérez-Barahona ()
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Carmen Camacho: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Agustín Pérez-Barahona: THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université

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Abstract: Dynamic spatial theory has been a fruitful approach to understanding economic phenomena involving time and space. However, several central questions still remain unresolved in this field. The identification of the social optimal allocation of economic activity across time and space is particularly problematic, not been ensured yet in economic growth. Developing a monotone method, we study the optimal solution of the spatial Ramsey model. Under fairly general assumptions, we prove the existence of unique social optimum. Considering a numerical implementation of our algorithm, we study the role played by capital mobility in the neoclassical growth environment. With capital irreversibility and economic openness, space allows for transitional dynamics. Moreover, in this context, capital mobility is beneficial as well in terms of social welfare and inequality. We also consider an application of our method to an extension of the spatial Ramsey model for optimal land-use planning.

Keywords: Control; Spatial dynamics; Ramsey model; Partial differential equations (search for similar items in EconPapers)
Date: 2022-07
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Published in Macroeconomic Dynamics, 2022, 26 (5), pp.1375-1422. ⟨10.1017/S1365100520000590⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04155450

DOI: 10.1017/S1365100520000590

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