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Social optimality in the constructed-capital model

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  • Stefan Wrzaczek

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

Suggested Citation

  • Stefan Wrzaczek, 2014. "Social optimality in the constructed-capital model," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 22(1), pages 211-232, March.
    • Handle: RePEc:spr:cejnor:v:22:y:2014:i:1:p:211-232
    DOI: 10.1007/s10100-013-0285-8
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    1. Grafeneder-Weissteiner, Theresa & Kubin, Ingrid & Prettner, Klaus & Prskawetz, Alexia & Wrzaczek, Stefan, 2015. "Coping with inefficiencies in a New Economic Geography model: The unintended consequences of policy interventions," Mathematical Social Sciences, Elsevier, vol. 76(C), pages 146-157.

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