Technology Choice, Financial Sector and Economic Integration Under the Presence of Efficiency Wages

International Economic Journal

2021

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Empirical evidence shows that firms located in regions with larger population size are on average larger and more productive. To explain this empirical observation, firms producing intermediate goods are assumed to choose their technologies with different levels of fixed and marginal costs. In this general equilibrium model of economic geography, intermediate good producers engage in oligopolistic competition. The model is tractable and leads to interesting and analytical results. An intermediate good producer in the region with a higher population produces a higher level of output and has a lower marginal cost of production regardless of the existence of regional trade. With regional trade, if a worker moves from the region with a lower number of workers to the region with a higher number of workers, intermediate good producers in both regions choose less advanced technologies.

Section: The Manufacturing Sectormentioning

confidence: 99%

The Choice of Technology and Economic Geography

International Economic Journal

2021

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“…In their models, firms engage in perfect competition and technology choice and rural-urban migration are not addressed. Wen and Zhou (2020) have studied a model of economic integration based on efficiency wages. There are some important differences between this article and Wen and Zhou (2020).…”

Section: Introductionmentioning

confidence: 99%

“…Wen and Zhou (2020) have studied a model of economic integration based on efficiency wages. There are some important differences between this article and Wen and Zhou (2020). First, in that model, labour market in the agricultural sector is treated in the same way as labour markets in the manufacturing sector.…”

Section: Introductionmentioning

confidence: 99%

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The choice of technology in economic development

Wen

Australian Economic Papers

2023

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The impact of capital accumulation on job creation is an important and interesting issue in economic development. This model provides a general‐equilibrium framework for studying technology choice with unemployment in a developing economy based on micro‐foundations. Unemployment in the urban sector results from the existence of efficiency wages. Manufacturing firms engage in oligopolistic competition and choose technologies to maximise profits. A more advanced technology uses more capital and less labour. In the steady state, an increase in the amount of capital induces firms to choose more advanced technologies and the wage rate increases. While a higher capital stock always induces firms to choose more advanced technologies, urban unemployment rate may decrease and agricultural sector employment may increase.

“…In this model, firms producing the same good are assumed to engage in oligopolistic competition (Liu & Wang, 2010; Qiu & Zhou, 2007; Wen & Zhou, 2020). The relevance of oligopoly in developed countries such as the United States is discussed in detail in Chandler (1990).…”

Section: Introductionmentioning

confidence: 99%

The partition of production between households and markets

Colburn

International Studies of Economics

2022

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The process of industrialization was accompanied by the switch from household production to firm production. The industrialization process was also a process of population growth, the appearance of general-purpose technologies, and the expansion of international trade. This paper studies the partition of production between households and firms in an analytically tractable general equilibrium model with a continuum of goods. We show that population growth, development of general-purpose technologies, and the opening of international trade increase the percentage of goods produced by firms. However, with the appearance of a technology biased toward home production, the percentage of goods produced by households can increase.