Abstract
The purpose of this paper is to find an optimal regional development process under development speed constraints with special emphasis on regional government's surplus revenue. Although there have been done many works of dynamic spatial allocation of investment, little attention has been given to the feasibility of the development path itself.
This study, first, formulates a regional economic-finance model with a freely allocative budget of a regional government and the feasibility set of development speeds arising from the government investment. Secondly the paper explores an optimal development process under speed constraints of a two-facilities one-region case with linear production and welfare functions. The study shows that the optimal path is a balanced growth of two facilities with a constant ratio independent of weight of the welfare function. Thirdly an optimal timing of transportation investment in a two-region case is discussed with actual data.
