Pasquale Commendatore

Footloose capital and productive public services

We analyse in a Footloose Capital productive public services provided by a central government aiming at reducing regional disparities. Two countervailing effects occur - one upon productivity and another upon local demand - the relative strength of which depends upon the financing scheme. Only if the rich region contributes sufficiently to the financing of the public services in the poor region, the poor region will actually gain. In studying these questions we pay particular attention to the dynamic adjustment processes and to the role of trade freeness.

Footloose Entrepreneurs, Taxes and Subsidies

Abstract This paper challenges the robustness of policy propositions of the New Economic Geography. Simply altering the temporal framework of the Footloose Entrepreneur model implies that the system can exhibit periodic cycles, chaotic orbits or agglomeration. Minute changes in a tax or subsidy rate can have dramatic, unpredictable and/or irreversible repercussions on the spatial location of manufacturing industry and on social welfare. The complexity of the dynamics is likely to be exacerbated by competition between governments employing subsidies to attract or retain entrepreneurs. The possibility of complex dynamical behaviour is not eliminated by assuming that entrepreneurs are ‘rational’.

Towards a Multiregional NEG Framework: Comparing Alternative Modelling Strategies

This chapter reviews the New Economic Geography (NEG) models that explain the uneven distribution of economic activity across space employing endogenous agglomeration processes, and the interplay of agglomeration and dispersion forces. Unlike the two-region models that have a restricted applicability, this chapter focuses on the multiregional NEG models recently developed in the literature, reviews their contributions systematically and compares different modelling strategies. As unifying framework, we use the footloose entrepreneur model considering the role and nature of transport costs, and the welfare properties of the spatial equilibria and the design of optimal economic policies.

A Three-Region New Economic Geography Model in Discrete Time: Preliminary Results on Global Dynamics

In this paper, we deal with a three-region new economic geography model. The dynamic law which governs the migration of the mobile factor – in our context, “footloose” entrepreneurs (Commendatore et al. (Spat Econ Anal 3(1):115–141, 2008); Forslid and Ottaviano (J Econ Geogr 3:229–240, 2003)) – across three identical regions is formulated in discrete time. The resulting dynamical model belongs to the class of two-dimensional noninvertible maps (Mira et al. (1996) Chaotic dynamics in two-dimensional noninverible maps. World Scientific, Singapore). We present the local stability analysis of the map’s fixed points, corresponding to long term stationary equilibria of the economic system, and a preliminary study of its global stability properties. Our results show that the presence of a third region matters and that there are crucial differences with respect to the symmetric two-region footloose entrepreneurs model: firstly, when the manufacturing sector is absent in one of the three regions, stable asymmetric equilibria may emerge; secondly, we detect complex/strange two-dimensional attractors that cannot exist in two-region new economic geography models, which are typically one-dimensional; finally, we highlight the complex self-similar structure of the basins of attraction of some of the two-dimensional attractors.

Typical bifurcation scenario in a three region identical New Economic Geography model

We study global dynamics of the New Economic Geography model which describes spatial distribution of industrial activity in the long run across three identical regions depending on the balancing of agglomeration and dispersion forces. It is defined by a two-dimensional piecewise smooth map depending on four parameters. Based on the numerical evidence we discuss typical bifurcation scenarios observed in the model: starting from the symmetric fixed point (related to equal distribution of the industrial activity in all the three regions) two different scenarios are realized depending on whether the transportation cost parameter is increased or decreased. Emergence of the Wada basins of coexisting attractors leading to the so-called final state sensitivity is discussed, as well as final bifurcation of the chaotic attractor.

The Influence of Different Forms of Government Spending on Distribution and Growth

This paper deals with the influence of different types of government expenditure on growth in a post-Keynesian framework. The analysis considers a government sector with a balanced budget and an autonomous and non-linear investment function, interpreted along a Kaleckian and a Classical-Harrodian line. It shows under which conditions different types of government expenditure are beneficial or detrimental for economic growth, comparing some results with those reached by Barro in his 1990 Journal of Political Economy article, and points out the emergence of phenomena like multiple equilibria, hysteresis and low growth traps.

R&D Public Expenditure, Knowledge Spillovers and Agglomeration: Comparative Statics and Dynamics

Since the introduction of the influential core-periphery (CP) model by Krugman (1991),New EconomicGeography (NEG) models have provided a natural framework for non-linear dynamic analysis.1 Moreover, as shown by the comprehensive picture of policy implications of the NEG paradigm provided by Baldwin et al. (2003), a well established finding is that policy changes have non-linear effects on industrial location, in general.

Government Spending, Effective Demand, Distribution and Growth: A Dynamic Analysis

Institutional and Social Dynamics of Growth and Distribution presents a set of original contributions to the much-debated issues of long-run economic growth in relation to institutional and social progress.

Source versus residence: A comparison from a new economic geography perspective

Recently, issues of international taxation have also been analysed from a New Economic Geography perspective. These discussions show that agglomerative forces play a non negligible role. In the paper, we introduce explicitly taxation into a Footloose Capital Model and compare implications of taxation according to the residence principle and the source principle from a New Economic Geography perspective. We confirm that agglomerative effects change the results substantially compared to the standard analysis and that the two taxation principles have different implications for industry agglomeration. (authors abstract)

An Investigation of Interregional Trade Network Structures

We provide empirical evidence on the network structure of trade flows between European regions and discuss the theoretical underpinning of such a structure. First, we analyze EU regional trade data using Social Network Analysis. We describe the topology of this network and compute local and global centrality measures. Finally, we consider the distribution of higher order statistics, through the analysis of local clustering and main triadic structures in the triad census of interregional trade flows. In the theoretical part, we explore the relationship between trade costs and trade links. As shown by Behrens (J Urban Econ 55(1):68–92, 2004), Behrens (Reg Sci Urban Econ 35(5):471–492, 2005a) and Behrens (J Urban Econ 58(1):24–44, 2005b) in a two-region linear new economic geography (NEG) model, trade costs and the local market size determine, even with finite trade costs, unconditional autarky and unilateral trade, that is, a one-directional flow from one region to the other. Following these contributions and guided by the empirical evidence, we clarify the relationship between market competition, trade costs and the patterns of trade in a three-region NEG model. We identify a larger set of trade network configurations other the three elementary ones that occur at the dyadic level between two regions (no trade, one-way trade, reciprocated two-way trade), and relate the model with the triad census.