Modelling the folk theorem of spatial economics: a heterogeneous regional growth model

During the last year, the research field of spatial economic has rapidly increased. There is consensus that the economic performance of a region depends not only on its own potential, but also on the development of their neighbouring regions. Knowledge spillovers, which are non constant over space, should influence the evolution of the region specific productivity. The so called "folk theorem of spatial economics" states, that increasing returns to scale are essential for explaining the uneven economic distribution of specific economic activity, which implies that knowledge spillover, agglomeration and distribution of per capita productivity are closely linked. Thus, the aim of this paper is, to introduce a spatial regional growth model, which links first time knowledge spillover, agglomeration, distribution of per capita productivity and the grasp of spillovers. Further, it is shown in a simulation study, how different regimes of returns to scale and grasps of knowledge affect agglomeration and distribution of per capita productivity. One of key findings is, that grasp of knowledge affects dynamic distribution of per capita productivity. Moreover, the simulation study particularly finds support for the "folk theorem of spatial economics".Spatial Economics, Agglomeration, Spatial knowledge spillovers, New economic geography, Regional growth

Modelling the folk theorem of spatial economics: a heterogeneous regional growth model

During the last year, the research field of spatial economic has rapidly increased. There is consensus that the economic performance of a region depends not only on its own potential, but also on the development of their neighbouring regions. Knowledge spillovers, which are non constant over space, should influence the evolution of the region specific productivity. The so called "folk theorem of spatial economics" states, that increasing returns to scale are essential for explaining the uneven economic distri- bution of specific economic activity, which implies that knowledge spillover, agglom- eration and distribution of per capita productivity are closely linked. Thus, the aim of this paper is, to introduce a spatial regional growth model, which links first time knowledge spillover, agglomeration, distribution of per capita productivity and the grasp of spillovers. Further, it is shown in a simulation study, how different regimes of returns to scale and grasps of knowledge affect agglomeration and distribution of per capita productivity. One of key findings is, that grasp of knowledge affects dynamic distribution of per capita productivity. Moreover, the simulation study particularly finds support for the "folk theorem of spatial economics".Spatial Economics, Agglomeration, Spatial knowledge spillovers, New economic geography, Regional growth

A Spatially-related Note on Entrepreneurship and Economic Growth

A large and still growing body of literature suggests that entrepreneurship is of exceptional importance in explaining knowledge spillovers. Although quantifying the impact of entrepreneurial activity for economic growth is an interesting issue – particularly at the regional level – a concise formulation within a theoretical growth model is still missing. This paper in general tries to uncover the link between own- and neighbour-related regional entrepreneurial activity in innovation and regional growth within a spatial semi-endogenous growth model in the spirit of Jones (1995) reflecting recent empirical findings on entrepreneurial activity for economic growth. The paper derives an explicit solution for the transitional as well as for the balanced growth path level of ideas.entrepreneurship, economic growth, innovation, knowledge spillover

Market dynamics, dynamic resource management and environmental policy in the context of (strong) sustainability

In this paper, we investigate the relationship between market dynamics, dynamic resource management and environmental policy. In contrast to static market entry games, this paper draws attention to the effects of market dynamics on resource dynamics et vice versa, because (1) we show that feedback processes are necessary for obtaining a better understanding of what drives the dynamics between the evolution of common-pool resources and the number of harvesters and more importantly, (2) this analysis provides an environment discussing sustainability in an appropriate inasmuch dynamic way. The paper makes following major points: (1) Interpreting the monopoly-scenario as a non-cooperative solution and the firm coexistence solution as a cooperative solution, it is shown that the coexistence solution of this model implies a degenerate saddle-node equilibrium. (2) An increasing number of harvesters does not necessarily imply a lower stock of the common-pool resource in the long run. (3) The paper introduces a way establishing an output-sharing solution by implementing an output tax, which turns out to be a pure effort tax in the long run. (4) Strong resource sustainability is not possible, given cost reducing technological progress is relevant and policy interventions ceased. With respect to environmental policy, we can conclude that a tax scheme is not a substitute to a partnership solution dealing with the common-pool problem, but is treated as an instrument establishing such a solution in the sense of a policy mix approach.sustainability, resource management, environmental policy, common resources, population dynamics

Firm Heterogeneity, Credit Constraints, and Endogenous Growth

This paper is concerned with the role of firm heterogeneity under credit constraints for economic growth. We focus on firm size, innovativeness and credit constraints in a semi-endogenous growth model reflecting recent empirical findings on firm heterogeneity. It allows for an explicit solution for transitional growth and balanced growth path productivity as well as the growth maximizing firm heterogeneity. This enables us to draw inference about the impact of key policy parameters of the model on these quantities and to draw conclusions about firm and capital market related policies.firm heterogeneity, credit constraints, firm size, SME, economic growth

On the stability of equilibria in replicator dynamics modelling: an application in industrial dynamics considering resource constraints

Replicator dynamic modelling (rdm) is used to discuss industrial evolution problems with heterogeneous agents. However, some of the models tend to be very complex and, therefore, analytical solutions cannot be obtained. Hence, the paper proposes to start with a relatively simple model and check its stability of the equilibria before expanding the model. This strategy is more effective than relying on simulation based studies where instability cannot be ruled out ex ante. Thus, the aim of this paper is to introduce a stability check for rdm, especially, if one ore more real Eigenvalues with value zero occur. Besides the (Strogatz, 1994) and (Hilborn, 1994) local stability theorem, this method provides an alternative and more flexible procedure for stability analysis for rdm. To apply this approach, an industrial replicator dynamic model containing three differential equations is set up.Evolutionary economics, Replicator dynamics

Knowledge diffusion and knowledge transfer: two sides of the medal

Understanding the way in which knowledge is technically produced and transferred, and how its diffusion path can be characterized is of fundamental importance for the performance of an economy. Although this fact seems to be plausible ex ante, the relevant literature so far has paid less attention investigating the microeconomic link between knowledge transfer and knowledge diffusion in a comprehensive approach. The aim of this paper is to highlight the link between knowledge transfer, knowledge diffusion and network effects in a stochastic environment, because the adoption decision of new knowledge should be treated as a stochastic event. For this reason, a new knowledge diffusion model in the line of Bass (1969) has been put forward, which integrates knowledge diffusion and knowledge transfer. The advantage of the proposed model is twofold. From a theoretical point of view, not only the so-called unimodal diffusion phenomena can be modelled, but also bimodal diffusion phenomena can be obtained. From an empirical point of view, the model which incorporates heteroscedastic errors and mean reverting behaviour can be theoretically estimated directly within a standard SUR context. --Knowledge diffusion,knowledge transfer,SUR

On the stability of equilibria in replicator dynamics modelling: an application in industrial dynamics considering resource constraints

Replicator dynamic modelling (rdm) is used to discuss industrial evolution problems with heterogeneous agents. However, some of the models tend to be very complex and, therefore, analytical solutions cannot be obtained. Hence, the paper proposes to start with a relatively simple model and check its stability of the equilibria before expanding the model. This strategy is more effective than relying on simulation based studies where instability cannot be ruled out ex ante. Thus, the aim of this paper is to introduce a stability check for rdm, especially, if one ore more real Eigenvalues with value zero occur. Besides the (Strogatz, 1994) and (Hilborn, 1994) local stability theorem, this method provides an alternative and more flexible procedure for stability analysis for rdm. To apply this approach, an industrial replicator dynamic model containing three differential equations is set up.Evolutionary economics, Replicator dynamics

Spatial model selection and spatial knowledge spillovers: a regional view of Germany

The aim of this paper is to introduce a new model selection mechanism for cross sectional spatial models. This method is more flexible than the approach proposed by Florax et al. (2003) since it controls for spatial dependence as well as for spatial heterogeneity. In particular, Bayesian and Maximum-Likelihood (ML) estimation methods are employed for model selection. Furthermore, higher order spatial influence is considered. The proposed method is then used to identify knowledge spillovers from German NUTS-2 regional data. One key result of the study is that spatial heterogeneity matters. Thus, robust estimation can be achieved by controlling for both phenomena. --Spatial econometrics,Bayesian spatial econometrics,Spatial heterogeneity