Core-periphery model with forward-looking expectations

Much of the 'economic geography literature assumes myopic migrants, so a key question is whether the results derived hold when migrants think about the future. The question is addressed by introducing a set of techniques - partly analytic and partly numerical - that allow consideration of forward-looking expectations in the standard core-periphery model. The techniques reveal a startling result. Forward-looking behaviour is shown analytically to never affect the 'break' and 'sustain' points. Simulation of global adjustment paths shows that forward-looking expectations have no qualitative effect on the model's behaviour when migration costs are high; here myopia is truly an assumption of convenience. If migration costs are lower, history-versus-expectations considerations emerge acid agglomeration can be a self-fulfilling prophecy. (C) 2001 Elsevier Science B.V. All rights reserved.