Growth, environmental change and business cycles in a multi-regional economy

Abstract

The purpose of this is to examine multi-regional dynamics with wealth and pollutant accumulation over time. The paper generalizes the dynamic model by Zhang (2016). It treats regional amenities endogenous variables dependent on the region’s population and level of pollutants. Regional differences in productivities and amenities are important for modelling regional agglomeration. The government decides environmental tax rates on production, consumption, wealth, income from wealth and housing. The economy is perfectly competitive. The dynamics of -region economy is described by differential equations. We demonstrate business cycles due to different exogenous periodic perturbations in the multi-regional economy