TITLE:
International Factor Mobility and Dynamic Paths
AUTHORS:
Hiroshi Goto, Yuji Matsuoka
KEYWORDS:
Labor Mobility; Capital Mobility; Spatial Equilibrium; Adjustment Process; Phase Diagram
JOURNAL NAME:
Theoretical Economics Letters,
Vol.3 No.6,
December
5,
2013
ABSTRACT:
The aim of this paper is to consider the adjustment process of the
spatial structure in a two-country economy where both labor and capital are
mobile. For this purpose, we combine the model of New Economic Geography with
the phase diagram technique. We show that the agglomeration processes are not
always monotonic since the mobile factors interact with each other. More
specifically, even when both factors are eventually agglomerated to one country, it
is possible that labor and capital move in opposite directions in the
adjustment process. Differences in factor endowment ratio and market size play
significant roles in this transition path.