Complexity in Environment and Space - Sensitivity on Model Specification

Area of Science:

• Environmental Economics
• Economic Geography
• Spatial Economics

Background:

• Understanding the spatial distribution of economic activity is crucial.
• Environmental damage is an increasingly significant factor in economic decisions.
• Existing models often do not fully capture the interplay between location, mobility, and environmental externalities.

Purpose of the Study:

• To analyze the complex interactions between environmental damage and the spatial location of firms and households.
• To extend the New Economic Geography (NEG) framework to incorporate environmental damage and mobility processes.
• To investigate the long-run dynamics and stability of economic activity distribution.

Main Methods:

• Development of a two-dimensional piecewise smooth map model.
• Application of analytical and numerical tools to explore model dynamics.
• Analysis of fixed points and basins of attraction to understand system stability.

Main Results:

• The extended NEG model reveals complex long-run dynamics.
• Different types of fixed points and their basins of attraction were identified.
• The spatial location of economic activity is shown to be path-dependent.

Conclusions:

• Historical factors play a critical role in determining the long-term spatial patterns of economic activity.
• The model highlights the importance of considering environmental damage in spatial economic analysis.
• The complexity of the system underscores the interconnectedness of economic and environmental factors in location decisions.