Factor mobility and welfare For educational purposes we teach in the second year’s course regional and urban economics students the Edgeworth-Bowley box. At first sight the concept is quite simple, but because there are restrictions for the total amount of both labour and capital in both regions or countries, the intuition behind the model and especially the drawing of the box is rather complex. Therefore, I once wrote a straightforward but elaborate LaTeX script invoking the Tikz package.
Drawing the diagram of a stylized version of Krugman’s Increasing Returns and Economic Geography For educational purposes we teach in the second year’s course regional and urban economics a simplified version of Krugman’s model in his paper titled Increasing Returns and Economic Geography. The model we have adopted goes as follows:
We consider a simplified economy with two regions and 1 (million) workers ( $L=1$ ) in total. Region 1 is inhabited by 100,000 farmers (bound to their land so immobile), while in Region 2 there are 200,000 farmers.