The time-space evolution of economic density: theory and estimation

The Institute of Economics will hold a seminar meeting as part of its Seminar Series on Tuesday, March 12, 2024: Davide Fiaschi from University of Pisa will present the paper “The time-space evolution of economic density: theory and estimation (with A. Parenti and C. Ricci)".

Abstract:

This paper studies the time and spatial evolution of economic density through a continuous space-time aggregation-diffusion model, which encompasses competing effects of aggregation, repulsion, and diffusion.

Production and consumption are decided in local markets, characterized by the presence of spatial spillovers and amenities. Workers move across locations maximizing their instantaneous utility, subject to mobility costs. We prove the existence of a short-run Cournot-Nash equilibrium, and that, in the limit of an infinite number of workers, the sequence of short-run equilibria can be expressed by a partial differential equation.

To bring the model to the real data it is proposed a new discretization technique over time and space, which is able to disentangle the spatial effects into pure topography, agglomeration, repulsion, and diffusion forces. The estimate for the Italian municipalities personal income over the period 2008-2019 supports the models’ main predictions and outperforms the most common spatial econometric models used in the literature.

Seminar will be at Aula 1 Toscanelli.

For online partecipation use this link.