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The Spatial Concentration of Production Factors: the Analysis of Krugman's Model Using Numerical Experiments

Student: Adisa Kuasheva

Supervisor: Alexander Skorobogatov

Faculty: St.Petersburg School of Economics and Management

Educational Programme: Economics (Bachelor)

Final Grade: 9

Year of Graduation: 2016

The theme of this research is "The Spatial Concentration of Production Factors: the Analysis of Krugman's Model Using Numerical Experiments." The goal of this study is to provide numerical experiments with the specification of preferences function (CES function with horizontal differentiation of industrial products) and analyze the robustness of Krugman’s model to this change of the utility function - is there a difference in the results of the model and is it significant. During the study, we were set and solved the problem of preferences function specification in Krugman's model; next we provided numerical simulations and the comparative analysis of the numerical results. As a result of the specification, ceteris paribus, the partial and complete agglomeration of industrial activity equilibrium points have changed. Also, the difference in the numerical results of the welfare of the two specifications is about 16%. In turn, the difference in relative real wage rate between the case with a discrete set of goods and with horizontal differentiation of goods is 13% at the point of complete agglomeration.

Full text (added May 20, 2016)

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