152 research outputs found
Source versus Residence. A comparison from a New Economic Geography perspective
Recently, issues of international taxation have also been analysed from a New Economic Geography perspective. These discussions show that agglomerative forces play a non negligible role. In the paper, we introduce explicitly taxation into a Footloose Capital Model and compare implications of taxation according to the residence principle and the source principle from a New Economic Geography perspective. We confirm that agglomerative effects change the results substantially compared to the standard analysis and that the two taxation principles have different implications for industry agglomeration. (author's abstract)Series: Discussion Papers SFB International Tax Coordinatio
Dynamic Effects of Regulation and Deregulation in Goods and Labour Markets
Modern macroeconomic models with a Keynesian flavour usually involve nominal rigidities in wages and goods prices. A typical model is static and combines wage bargaining in the labour markets and monopolistic competition in the goods markets. As central policy implication it follows that deregulating labour and/or goods markets increases equilibrium employment. We reassess the consequences of deregulation in a dynamic model. It still increases employment at the fixed point, which corresponds to the static equilibrium solution. However, deregulation may also lead to stability loss and endogenous fluctuations.Labour and goods markets deregulation, monopolistic competition, business cycles
The dynamics of wages and employment in a model of monopolistic competition and efficient bargaining
A propos Brexit: on the breaking up of integration areas â an NEG analysis
Inspired by Brexit, the paper explores the effects of splitting an integration area or "Union" on trade Patterns and the spatial distribution of industry. A linear three-region New Economic Geography (NEG) model is developed and two possible situations before separation are considered: agglomeration and dispersion. By analogy with the Brexit options, soft and hard separation scenarios are considered. Firms in the leaving region may move to the larger Union market, even on the periphery, relocation substituting trade; or firms in the Union may move in the more isolated leaving region, escaping from competition. The paper also analyses deeper Union integration following separation. Instances of multistability and complex Dynamics are found
Composition of public expenditure, effective demand, distribution and growth
We introduce public expenditure (PE) in a general post Keynesian framework characterized by a nonlinear investment function. Our aims are: 1) to provide a systematic analysis of the impact of PE (âproductiveâ or ânon productiveâ) and of the Government sector size on economic growth, allowing effective demand to play a crucial role. Our work fills a lacuna in the post Keynesian literature given that scant attention has been devoted to this topic. In our paper, âProductiveâ PE affects the (fixed) coefficients of production similarly to Barro (1990); 2) to compare and contrast two different interpretations which assign a different meaning to the autonomous component of the investment function, corresponding to long run demand growth expectations: the Kaleckian interpretation assumes exogenous long run expectations; in the Classical or Harrodian interpretation, long-run expectations are linked to the âwarranted rate of growthâ; 3) to reproduce a variety of complex phenomena (multiple equilibria, hysteresis, low growth traps, regular and irregular growth cycles), by introducing a simple nonlinearity in the investment function in the spirit of Kaleckiâs (1937) investment theory and Kaldorâs (1940) trade cycle model. A plethora of results emerge from our simple framework concerning comparative statics and dynamicbehaviour.
Productive Public Expenditure in a New Economic Geography Model
We assess whether and how differences in productive public expenditure impacts on industrial location. Since productive public expenditure and taxation affect in opposite direction industrial location, it is not straightforward that following an increase in productive public expenditure in a region, that region will necessarily enjoy stronger agglomeration. As a major contribution to the literature, we consider jointly two effects arising from public policy: the demand effect and the productivity effect. The interplay of these two effects determines the final impact on the spatial distribution of firms. The result is influenced by the proportion in which tax payers of the two regions contribute to the financing of public expenditure.economic geography; public expenditure, footloose capital
Economic integration and agglomeration in a customs union in the presence of an outside region
New Economic Geography (NEG) models do not typically account for the
presence of regions other than the ones involved in the integration process. We explore such a
possibility in a Footloose Entrepreneur (FE) model aiming at studying the stability properties
of long-run industrial location equilibria. We consider a world economy composed by a customs
union of two regions (regions 1 and 2) and an "outside region" which can be regarded as
the rest of the world (region 3). The effects of economic integration on industrial agglomeration
within the customs union are studied under the assumption of a constant distance between
the customs union itself and the third region. The results show that higher economic integration
does not always implies the standard result of full agglomeration of FE models. This incomplete
agglomeration outcome is due to the fact that the periphery region keeps a share of
industrial activities in order to satisfy a share of "external demand". That is, the deindustrialization
process brought about by economic integration in the periphery of the union is mitigated
by the demand of consumers living in the rest of the world. In general, the market size of
the third region affects the number of the long-run equilibria, as well as their stability properties.
In addition to the standard outcomes of FE models, we describe the existence of two
asymmetric equilibria characterised by unequal distribution of firms between regions 1 and 2,
with no full agglomeration though. Interestingly, these equilibria are stable and therefore can
be regarded as a likely long-run equilibrium state of the economy. (author's abstract)Series: Department of Economics Working Paper Serie
The cobweb, borrowing and financial crises
Studies of non-linear cobweb models have failed to address a fundamental issue: whether the complex dynamical behavior displayed by such models is consistent with the survival of producers. This paper shows that where borrowing is unconstrained, as is implicitly assumed in standard cobweb models, borrowing results in financial crises. Incorporating constraints on borrowing is needed to salvage cobweb models. Industry performance (in terms both of profitability and of the incidence of bankruptcies) is highly sensitive to the nature of such credit restrictions
The impact of Brexit on trade patterns and industry location: a NEG analysis
We explore the effects of Brexit on trade patterns and on the spatial distribution of industry between the United Kingdom and the European Union and within the EU. Our study adopts a new economic geography (NEG) perspective developing a linear model with three regions, the UK and two separated regions composing the EU. The 3-region framework and linear demands allow for different trade patterns. Two possible ante-Brexit situations are possible, depending on the interplay between local market size, local competition and trade costs: industrial agglomeration or dispersion. Considering a soft and a hard Brexit scenario, the ante-Brexit situation is altered substantially, depending on which scenario prevails. UK firms could move to the larger EU market, even in the peripheral region, reacting to the higher trade barriers, relocation representing a substitute for trade. Alternatively, some EU firms could move in the more isolated UK market finding shelter from the competition inside the EU. We also consider the post-Brexit scenario of deeper EU integration, leading to a weakening of trade links between the EU and the UK. Our analysis also reveals a highly complex bifurcation sequence leading to many instances of multistability, intricate basins of attraction and cyclical and chaotic dynamics.Series: Department of Economics Working Paper Serie
Codimension-two border collision bifurcation in a two-class growth model with optimal saving and switch in behavior
We consider a two-class growth model with optimal saving and switch in behavior. The dynamics of this model is described by a two-dimensional (2D) discontinuous map. We obtain stability conditions of the border and interior fixed points (known as Solow and Pasinetti equilibria, respectively) and investigate bifurcation structures observed in the parameter space of this map, associated with its attracting cycles and chaotic attractors. In particular, we show that on the
x-axis, which is invariant, the map is reduced to a 1D piecewise increasing discontinuous map, and prove the existence of a corresponding period adding bifurcation structure issuing from a codimension-two border collision bifurcation point. Then, we describe how this structure evolves when the related attracting cycles on the x-axis lose their transverse stability via a transcritical bifurcation and the corresponding interior cycles appear. In particular, we show that the observed bifurcation structure, being associated with the 2D discontinuous map, is characterized by multistability, that is impossible in the case of a standard period adding bifurcation structure
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