Two-Group Spatial Structures with Capital and Knowledge

Abstract

This chapter introduces endogenous knowledge into the model with heterogeneous population proposed in the previous chapter. Whether economic development will result in the divergence or convergence of income and wealth distribution among various groups of people is one of the main concerns of the classical economists. But only a few theoretical dynamic models explicitly deal with the issues concerning the co-existence of multiple groups. Issues related to the co-existence, separation and stability of multiple income classes are well raised in urban economics within static frameworks of exogenous incomes (e.g., Yinger, 1976, Yellin, 1974, Schare, 1976, Zhang, 1989a). This chapter examines the effects of differences in knowledge utilization and savings behavior between the two groups upon long-run growth and wealth and income distribution within the framework of spatial economics. This chapter is based on Zhang (1993c).