Introduction

So far we have not paid much attention in this book to the role of dynamics in geographical economics. Instead, we have focused attention on the relationship between a long-run equilibrium and the structural parameters, given an initial distribution of labor and production. We argued, in chapter 3, that the novelty of the core model of geographical economics is the endogenous determination of market size, fostered by the migration of mobile workers to regions with higher real wages. The dynamics underlying the adjustment path – that is, how we evolve over time (see our remarks below on “time”) from an initial distribution to a final distribution, and the intricacies of economic growth and development – have been virtually absent from the analysis so far. This chapter partially fills this void. In doing so, we distinguish between three types of dynamics, increasing in complexity and in real-world importance:

1. (i) adjustment dynamics;

2. (ii) simulation dynamics; and

3. (iii) growth and development

(i) Adjustment dynamics. This type of dynamics analyzes the adjustment path over time, from an initial distribution of manufacturing production between regions to a final long-run equilibrium, by showing the sequence of short-run equilibria leading to the long-run equilibrium. The driving force behind this adjustment process in the core model of geographical economics is, therefore, the migration decisions of individuals moving towards regions with higher real wages, the differences arising from the tensions between the home market effect and the price index effect in this sequence of short-run equilibria.