Pasquale Commendatore, University of Naples 'Federico II', Naples, Italy
Ingrid Kubin, Vienna University of Economics and Business Administration, Vienna, Austria
Iryna Sushko, NASU Institute of Mathematics, Kyiv, Ukraine

Abstract: In this paper, we study the complex interaction between environmental damage and location in space of firms and entrepreneurial households. We use a New Economic Geography (NEG) framework, suitably extended to account for environmental damage and the two mobility processes. The resulting model is a two-dimensional piecewise smooth map with two constraints for each variable, and we use analytic and numerical tools to explore its long-run dynamics. We pay special attention to the different types of fixed points and the structure of the respective basins of attraction. Their complexity re-enforces a core theme of the NEG: History matters for the long run location in space of economic activity.

Keywords: new economic geography, environmental pollution, industry location, residence choice, bifurcation analysis, complex dynamics