The Choice of Technology and Economic Geography

Haiwen Zhou

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Technology choice; economic geography; international trade; increasing returns; oligopoly (search for similar items in EconPapers)
JEL-codes: D43 F12 L13 O14 R12 (search for similar items in EconPapers)
Date: 2021-12-04
New Economics Papers: this item is included in nep-cwa, nep-geo, nep-ind, nep-int and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:110939

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