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Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model

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  • BOUCEKKINE, Raouf
  • CAMACHO, Carmen
  • ZOU, Benteng

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 problem in 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • BOUCEKKINE, Raouf & CAMACHO, Carmen & ZOU, Benteng, 2009. "Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model," LIDAM Reprints CORE 2090, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2090
    DOI: 10.1017/S1365100508070442
    Note: In : Macroeconomic Dynamics, 13(1) 20-45, 2009
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    1. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, April.
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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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