Labor Mobility and Dynamic Core−Periphery Patterns : A Two−Region Case

Paul Krugman (1991) proposed a geographic model in which a country consisting of two regions can endogenously become differentiated into an industrialized "core" and an agricultural "periphery". His model can give rise to multiple equilibria at which manufacturing production is concentrated in one region or divided between the both regions. We introduce to his basically static model a discrete−time adjustment process which leads the workers who earn lower real wage than the average to migrate to the other region which offers them higher real wage. Numerical simulations suggest not only that persistent endogenous fluctuations in manufacturing share are possible but also that discontinuous changes in manufacturing share over time can occur without any changes in the underlying system. Furthermore, the basin of attraction for a concentration steady state turns out to have a complicated structure for high transportaion costs