Some Dynamic Extensions of von Thünen’s Spatial Arrangement Model (1826)

Abstract

This paper introduces a dynamic evolution with an abrupt fall of transportation cost to the steady and monotonic von Thünen model (1826). Exploring different scenarios by means of numerical simulations, it reveals a lack of robustness of such model in the long run, which is expressed by the emergence of negative profitability for some production centers located far from the consumption centers. Simulations, which assume either one consumption center or two, predict the coexistence of winners and losers when localization is driven by Adam Smith’s invisible hand (without regulation). Moreover, they show that the transition stage toward the steady state is not monotonic, which opens up opportunities for the exploration of that stage and its relation to the complexities of spatial development of economies.