| Authors |
Xepapadeas, A., Yannacopoulos, A. and Ioannidis, A. |
| Title |
Spatial Growth: The Distribution of Capital across Locations when Saving Rates are Exogenous |
| Abstract |
Economic growth has traditionally been analyzed in the temporal domain, while the spatial dimension is captured by cross-country income differences. Data suggest great inequality in income per capita across countries, with a slight but noticeable increase over time (Acemoglu 2009). Seeking to explore the mechanism underlying the temporal evolution of the cross sectional distribution of economies, we develop a spatial growth model where saving rates are exogenous. Capital movements across locations are governed by having capital moving towards locations of relatively higher marginal productivity, with a velocity determined by the existing stock of capital and its marginal productivity. This mechanism leads to a capital accumulation equation augmented by a nonlinear diffusion term, which characterizes spatial movements. Our results suggest that under diminishing returns, the growth process leads to a stable spatially non-homogenous distribution for per capita capital and income in the long run. AK production functions and increasing returns lead to strong persistent and increasing concentration of capital in a very few locations. Insufficient savings may lead to the emergence of poverty cores where capital stock is depleted in some locations. |
| Creation Date |
2014-11-08 |
| Keywords |
Economic growth, space, capital flows, nonlinear diffusion, Solow model, steady-state distributions, stability |
| Classification JEL |
O4, R1, C6 |
| File |
Spatial.Growth.The.Distribution.of.Capital.across.Locations.pdf (585883 bytes) |
| File-Function |
First version |
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Copyright © 2009 [D.I.E.S.S. A.U.E.B.]. All rights reserved.
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