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The impact of pollution on the dynamics of industry location and residence choice

Author

Listed:
  • P. Commendatore

    (University of Naples ‘Federico II’
    National Research Council - Institute for Studies on the Mediterannean (Ismed-CNR))

  • I. Kubin

    (Vienna University of Economics and Business WU)

  • M. Sodini

    (University of Naples ‘Federico II’
    Technical University of Ostrava)

  • I. Sushko

    (Institute of Mathematics, NASU, and Kyiv School of Economics)

Abstract

In this paper we analyze the role of pollution for industry location and residence choice. We present a new economic geography (NEG) model in which manufacturing generates local pollution (that does not accumulate) and uses two types of labour input: unskilled workers that cannot migrate and work where they live; and high-skilled entrepreneurs that choose where to produce and where to live. Taking on board costless commuting or, in alternative, distance working, entrepreneurs can live in a different location from production. Both types of households enjoy utility from consuming all commodities (locally and imported variants) and suffer from local pollution. The resulting model is of the footloose entrepreneur variant, but involves two dynamic equations: the standard one governing the residential choice of entrepreneurs, and another one governing where production is located. The current paper analyses the discrete time dynamic process defined by a two-dimensional piecewise smooth map. Depending on parameters this map can have possibly coexisting attractors of various types (fixed points, cycles, closed curves as well as chaotic attractors). We analytically obtain stability conditions for the fixed points. Using numerical methods we describe also some global dynamic properties of the considered map. Finally, we propose an economic interpretation of the results concerning local stability analysis and global dynamics.

Suggested Citation

  • P. Commendatore & I. Kubin & M. Sodini & I. Sushko, 2024. "The impact of pollution on the dynamics of industry location and residence choice," Annals of Operations Research, Springer, vol. 337(3), pages 739-768, June.
    • Handle: RePEc:spr:annopr:v:337:y:2024:i:3:d:10.1007_s10479-023-05568-z
    DOI: 10.1007/s10479-023-05568-z
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    Keywords

    New economic geography; Environmental pollution; Industry location; Residence choice; Bifurcation analysis; Complex dynamics;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F2 - International Economics - - International Factor Movements and International Business
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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