Nonlinear Dynamics, Psychology, and Life Sciences, Vol. 11, Iss. 2, April, 2007, pp. 267-290
@2007 Society for Chaos Theory in Psychology & Life Sciences


Chaotic Footloose Capital

Pasquale Commendatore, Universita di Napoli ”Federico II”
Martin Currie, The University of Manchester
Ingrid Kubin, Vienna University of Economics and Business Administration

Abstract: This paper examines the long-term behavior of a discrete-time Footloose Capital model, where capitalists, who are themselves immobile between regions, move their physical capital between regions in response to economic incentives. The spatial location of industry can exhibit cycles of any periodicity or behave chaotically. Long-term behavior is highly sensitive to transport costs and to the responsiveness of capitalists to profit differentials. The concentration of industry in one region can result from high transport costs or from rapid responses by capitalists. In terms of possible dynamical behaviors, the discrete-time model is much richer than the standard continuous-time Footloose Capital model.

Keywords: new economic geography, core-periphery, footloose capital, chaos,