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Spatial economic fluctuations, rational expectations and regional economic policies
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TitleSpatial economic fluctuations, rational expectations and regional economic policies  
AuthorWu Haobo, An Husen, and Meng Ye  
OrganizationThe School of Economics and Management, Zhejiang Sci-tech University;Nankai University;School of Economics, Zhejiang University;; 
Key WordsRational Expectations; Migration Cost; Dynamic Spatial General Equilibrium; Sample Spectral Density Estimation 
AbstractThe long-run mechanism of regional economic policies which could attract input factors, then reduce the gap of interregional economic development is the core issue of this paper. Using the dynamic spatial general equilibrium approach, this paper found that regional economic policies levying the national income tax and subsidizing skilled workers or enterprises in targeted areas can not only narrow interregional economic development gap, but the existence of multiple equilibria provides an important mechanism for rational expectations and migration costs affecting the long-run equilibrium of the spatial economy. Co-integration tests show that the series such as the relative interregional gap of real wage rate of employed persons in urban units, the number of employed persons in urban units and the real GDP actually have a long-run equilibrium relationship in China since 1952. It is also found that these stationary time series only contain a few long-run periods, and the common periodic component of 36 year, which are just the reflections of rational expectations making the long-run equilibrium path transform from the central-point structure to the focal-point structure. 
Serial NumberWP1438 
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