Abstract
To include the relative location in space in a growth model means that an economy’s performance no longer lies solely within its range and conditions, but rather also depends on developments and decisions made beyond its borders. This chapter lays out the study’s model, which can be described as a growth model of N regional economies with a neoclassical production function that includes human capital, and where physical capital mobility between regional economies takes place. The configuration of the model, that incorporates both N regional economies and their accompanying superordinate economy is presented in Sect. 6.1. Section 6.2 examines specific characteristics of the neoclassical production. Finally, the key equations of the evolution of factors of production are discussed in Sect. 6.3.
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Notes
- 1.
Technically, the production function is a homogenous function of degree one.
- 2.
Equivalently, it may also be assumed that the superordinate economy always runs a balanced current account: this would leave the analysis unchanged, but \(C_i \) would become unidentifiable.
- 3.
The capital accumulation equation as given in Eq. (6.35) will serve as the basis for the major part of what follows in this study. In particular, relying on output and human capital as explanatory variables makes empirical interpretations of the model easier, as data on physical capital stocks are most often unavailable (and when available, they should be handled with care), while human capital may be proxied by educational attainment. Arguably, by conception physical capital is less abstract than its human counterpart, if we take into account that the expressions “skills of workers” and “depreciation of human capital” are common in the literature but nevertheless a bit clumsy, and impossible to measure directly.
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Sardadvar, S. (2011). Structure of the Model. In: Economic Growth in the Regions of Europe. Contributions to Economics, vol 1. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-2637-1_6
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DOI: https://doi.org/10.1007/978-3-7908-2637-1_6
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