Abstract
This paper proposes a compact two-region economic model with endogenous capital and knowledge accumulation. Regions are different in creativity, knowledge utilization efficiency, amenity and preference. The model describes an interaction between capital accumulation, knowledge growth, regional distribution of capital and labor, and locational prices over time under perfectly competitive institution. We provide the conditions for the existence of equilibria. We analyze effects of changes in some parameters on the economic equilibrium structure.
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