IDEAS home Printed from https://ideas.repec.org/a/taf/specan/v5y2010i4p389-398.html
   My bibliography  Save this article

Spatial Allocation of Capital: The Role of Risk Preferences

Author

Listed:
  • Udo Broll
  • Antonio Roldán-Ponce
  • Jack Wahl

Abstract

Abstract This paper considers a model of spatial allocation of investment capital under uncertainty. We demonstrate that the spatial concentration of economic activity depends upon properties of risk preferences deeper than risk aversion. The degree of so-called relative prudence unambiguously decides whether or not the diversification of income risk favours the geographic dispersion of economic activity. In our framework we relate risk diversification with economic integration. Then there exists risk preferences so that spatial concentration of industry and capital is not affected by the degree of economic integration or segmentation of the regions. We also study the impact of net return regressibility upon spatial allocation. Affectation spatiale du capital: le rôle des préférences de risques RÉSUMÉ La présente communication se penche sur un modèle d'application spatiale du capital-investissement en présence d'incertitudes. Nous démontrons que la concentration spatiale de l'activité économique est tributaire de propriétés de préférences de risque plus profondes que l'aversion au risque. Le degré de la soi-disant prudence relative décide sans ambiguïté si la diversification des risques de revenus favorise la dispersion géographique de l'activité économique. Dans le cadre de notre étude, nous examinons la diversification du risque en fonction de l'intégration économique. Il existe également des préférences de risque, qui font en sorte que la concentration spatiale de l'industrie et du capital n'est pas affectée par le degré d'intégration économique de la segmentation des régions. Asignación espacial de capital: la función de las preferencias de riesgo EXTRACTO Este trabajo considera un modelo de asignación espacial de capital de inversión en situación incierta. Demostramos que la concentración espacial de actividad económica depende más profundamente de las propiedades de las preferencias de riesgo que de la aversión al riesgo. El grado de la llamada prudencia relativa decide sin ambigüedad si la diversificación del riesgo de ingresos favorece, o no, la dispersión geográfica de la actividad económica. En nuestro marco, relacionamos la diversificación del riesgo con la integración económica. Asimismo, existen preferencias de riesgos para que la concentración espacial de la industria y el capital no sean afectados por el grado de integración o segmentación económica de las regiones.

Suggested Citation

  • Udo Broll & Antonio Roldán-Ponce & Jack Wahl, 2010. "Spatial Allocation of Capital: The Role of Risk Preferences," Spatial Economic Analysis, Taylor & Francis Journals, vol. 5(4), pages 389-398.
    • Handle: RePEc:taf:specan:v:5:y:2010:i:4:p:389-398
    DOI: 10.1080/17421772.2010.516442
    as

    Download full text from publisher

    File URL: http://www.taylorandfrancisonline.com/doi/abs/10.1080/17421772.2010.516442
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/17421772.2010.516442?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Steven Brakman & Harry Garretsen (ed.), 2008. "Foreign Direct Investment and the Multinational Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026457, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Udo Broll & Bernhard Eckwert & Keith K. P. Wong, 2019. "Market transparency and international allocation of capital," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 421-429, June.
    2. Broll, Udo & Roldán-Ponce, Antonio & Wahl, Jack E., 2012. "Regional investment under uncertain costs of location," Dresden Discussion Paper Series in Economics 01/12, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Su, Hsin-Ning, 2017. "Collaborative and Legal Dynamics of International R&D- Evolving Patterns in East Asia," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 217-227.
    2. Broll, Udo & Roldán-Ponce, Antonio & Wahl, Jack E., 2010. "Spatial allocation of capital: The role of risk preferences," Dresden Discussion Paper Series in Economics 03/10, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    3. Markusen, James R., 2013. "Expansion of trade at the extensive margin: A general gains-from-trade result and illustrative examples," Journal of International Economics, Elsevier, vol. 89(1), pages 262-270.
    4. Pasquale Commendatore & Ingrid Kubin, 2016. "Source versus residence: A comparison from a new economic geography perspective," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 201-222, June.
    5. Kähler, Jürgen, 2009. "Die Messung der Agglomeration als latente Variable und ihr Einfluss auf Staatsausgaben," Forschungs- und Sitzungsberichte der ARL: Aufsätze, in: Mäding, Heinrich (ed.), Öffentliche Finanzströme und räumliche Entwicklung, volume 127, pages 239-264, ARL – Akademie für Raumentwicklung in der Leibniz-Gemeinschaft.
    6. 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.
    7. Manuel Fernandez & Aysha Abdulla Ahmed Aljeed Alnuaimi & Robinson Joseph, 2020. "FDI Environment in China: A Critical Analysis," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 238-253, October.
    8. Radi, Davide & Lamantia, Fabio & Italo Bischi, Gian, 2021. "Offshoring, Reshoring, Unemployment, And Wage Dynamics In A Two-Country Evolutionary Model," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 705-732, April.
    9. Eddery Lam & Chi-Yin Wu, 2016. "The Economics of Inter-City Competition in Financial and Distribution Markets," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 12(1), pages 85-117, February.
    10. Andrzej Cieślik, 2015. "Imperfect competition, productivity differences and proximity concentration trade-offs," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 40.
    11. Neary, J. Peter, 2009. "Trade costs and foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 207-218, March.
    12. Jonathan Jones, 2017. "Agglomeration economies and the location of foreign direct investment: A meta-analysis," Journal of Regional Science, Wiley Blackwell, vol. 57(5), pages 731-757, November.
    13. Tomáš Buus & Jaroslav Brada, 2010. "Can Profit-shifting be Resolved by Penalization?," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2010(3), pages 56-74.
    14. Alejandro Donado, 2021. "Why do they JUST DO IT? A Theory of Outsourcing and Working Conditions," Open Economies Review, Springer, vol. 32(3), pages 559-586, July.
    15. Steven Brakman & Gus Garita & Harry Garretsen & Charles van Marrewijk & Charles van Marrewijk, 2008. "Unlocking the Value of Cross-Border Mergers and Acquisitions," CESifo Working Paper Series 2294, CESifo.
    16. José-Antonio Monteiro & Madina Kukenova, 2008. "Does Lax Environmental Regulation Attract FDI When Accounting For "Third-Country" Effects?," IRENE Working Papers 08-01, IRENE Institute of Economic Research.
    17. Manuel Fernandez & Mariam Mohamed Almaazmi & Robinson Joseph, 2020. "Foreign Direct Investment in Indonesia: An Analysis from Investors Perspective," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 102-112.
    18. Ronald S Wall & Martijn J Burger & G A (Bert) van der Knaap, 2011. "The Geography of Global Corporate Networks: The Poor, the Rich, and the Happy Few Countries," Environment and Planning A, , vol. 43(4), pages 904-927, April.
    19. Ott, Ingrid & Soretz, Susanne, 2022. "Institutional design and spatial (in)equality — The Janus face of economic integration," European Journal of Political Economy, Elsevier, vol. 73(C).
    20. Nguyen-Huu, Thanh Tam & Nguyen-Khac, Minh, 2017. "Impacts of Export-platform FDI on the production of upstream industries - do third country size, trade agreements and local content requirement matter? Evidence from the Vietnamese supporting industri," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-33.

    More about this item

    Keywords

    Spatial allocation; inter-regional disparity; risk aversion; prudence; regression; D81; R12; R30; R38;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:specan:v:5:y:2010:i:4:p:389-398. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RSEA20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.