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- Title
BRIDGING THE GAP BETWEEN GROWTH THEORY AND THE NEW ECONOMIC GEOGRAPHY: THE SPATIAL RAMSEY MODEL.
- Authors
Raouf Boucekkine; Carmen Camacho; Benteng Zou
- Abstract
We study a Ramsey problem in infinite and continuous time and space. The problem is discounted both temporally and spatially. Capital flows to locations with higher marginal return. We show that the problem amounts to optimal control of parabolic partial differential equations (PDEs). We rely on the existing related mathematical literature to derive the Pontryagin conditions. Using explicit representations of the solutions to the PDEs, we first show that the resulting dynamic system gives rise to an ill-posed problemin the sense of Hadamard. We then turn to the spatial Ramsey problem with linear utility. The obtained properties are significantly different from those of the nonspatial linear Ramsey model due to the spatial dynamics induced by capital mobility.
- Subjects
ECONOMIC geography; CAPITAL movements; PARABOLIC differential equations; MATHEMATICAL literature; ECONOMIC recovery; LINEAR statistical models; ECONOMIC policy
- Publication
Macroeconomic Dynamics, 2009, Vol 13, Issue 1, p20
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100508070442