Leisure, amenity, and capital accumulation in a multi-region model

Abstract

This paper proposes a multi-region growth model with endogenous labor supply, endogenous amenity, and capital accumulation. Although the production side is the same as in the neoclassical growth theory, in order to solve issues related to regional migration with capital accumulation we propose an alternative approach to consumer decisions about time distribution between work and leisure, housing consumption and saving. We show that the dynamics of the J-region national economy can be described by J-dimensional differential equations. We simulate the long-term economic structure of the national economy with three regions. It is demonstrated that with the Cobb–Douglas production functions and specified values of the parameters, the national dynamics has a unique equilibrium. We also carry out comparative statics analysis with regard to productivity levels, amenity parameters, propensity to save, and the population.