Regional Economic Equilibrium with Two Groups
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Regional location, interaction, economic structure and dynamic processes of various social and economic activities under different institutions are the main concerns of regional science. Regional economic analysis is to analyze regional location, regional demand and supply, prices of goods, services, distribution of immobile factors such as land and amenities among various activities, and interregional (monetary, material and information) flows (e.g., Isard, 1960). It is greatly desirable to develop a consistent framework to take all these important aspects of regional economies. From an economic structural point of view, it may be argued that two modelling frameworks are important in dealing with multiregional economic issues. The first is the interregional input-output analysis (e.g., Leontief, 1936, 1941, Isard, 1953). Although the input-output systems have proved effective for analyzing economic structure with complicated linkages among various sectors in multi-regional or multinational systems, it may be argued that it is often analytically difficult to introduce endogenous behavior of households in an effective way. The second is equilibrium approach. There are many efforts on applying and extending the general equilibrium model to multiple regional systems. But as well argued by (1992), equilibrium economics has failed in providing significant insights into the complexity of economic geography (see, e.g., Alonso, 1964, Beckmann, 1968, Greenhut, Norman and Hung, 1987, Krugman, 1991, Rauch, 1991, Fujita, 1989). We refer the comprehensive review, by (1992), on the reasons that the current models do not seem to integrate the spatial factor satisfactorily.
KeywordsWage Rate Economic Structure Land Rent Land Quality Service Price
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