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Title:Spatial allocation of capital: The role of risk preferences PDF Logo
Authors:Broll, Udo
Roldán-Ponce, Antonio
Wahl, Jack E.
Issue Date:2010
Series/Report no.:Dresden discussion paper series in economics 03/10
Abstract:This paper considers a model of spatial allocation of investment capital under uncertainty. We demonstrate that the spatial concentration of economic activity depends upon properties of risk preferences deeper than risk aversion. The degree of so-called relative prudence unambiguously decides whether or not the diversi cation of income risk favours the geographic dispersion of economic activity. In our framework we relate risk diversi cation with economic integration. Then there exists risk preferences so that spatial concentration of industry and capital is not a ected by the degree of economic integration or segmentation of the regions. We also study the impact of net return regressibility upon spatial allocation.
Subjects:spatial allocation
inter-regional disparity
risk aversion
prudence
regression
JEL:D81
R12
R30
R38
Document Type:Working Paper
Appears in Collections:Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden

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