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

Raouf Boucekkine, Carmen Camacho and Benteng Zou

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

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 (1923). We then turn to the spatial Ramsey problem with linear utility. The obtained properties are significantly different from those of the non-spatial linear Ramsey model due to the spatial dynamics induced by capital mobility.

Keywords: Ramsey model; Economic geography; parabolic equations; optimal control (search for similar items in EconPapers)
Pages: 32 pages JEL Classification: C61, C62, O41
Date: 2006-06
New Economics Papers: this item is included in nep-dev, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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