ABSTRACT
In the last chapter, the productive resources of each region were treated as fixed endowments. Regions in this case interact solely through the exchange of goods and services. In reality, two critical resources, labor and capital, can move from one region to another. Although it is sometimes possible for a person to live in one region and work in another, interregional movement of labor usually takes place via the migration of population. Some forms of capital can also “migrate.” For example, vehicles and some sorts of machinery can move from one region to another. Buildings and other types of infrastructure are spatially fixed, however. Most interregional movement of capital actually takes place via the more gradual process of interregional investment. Profits generated in one region are reinvested in a second region. Thus, as the capital stock in the first region depreciates, it grows in the second region. In this chapter, we explore the mechanisms that underlie such movements. What causes workers in one region to move and seek employment in another region? What makes a firm located in one region transfer its investments to another region?
