Introduction

So far we have not paid much attention in this book to the intermediate dynamics underlying the geographical economics models. Instead, we have usually focused attention on the relationship between a long-run equilibrium outcome and the structural parameters, given an initial geographical distribution of labour and production. For that reason we argued in chapter 2 that the novelty of geographical economics relative to new trade theory is to be found in the endogenous determination of market size, fostered by the migration of mobile workers towards regions with higher real wages. The dynamics underlying the adjustment path, that is how we evolve over time (see our remark below on “time”) from an initial distribution to a final distribution, and the intricacies of economic growth and development have been virtually absent in the analysis so far. This chapter partially fills this void. In doing so we will distinguish among three types of dynamics, increasing in complexity and in importance:

1. (i) adjustment dynamics

2. (ii) simulation dynamics

3. (iii) economic growth.

Adjustment dynamics

This type of dynamics analyzes the adjustment path over time, from an initial distribution of manufacturing production across regions to a final long-run equilibrium, by showing the sequence of short-run equilibria leading to the long-run equilibrium.