Interconnected communications networks and home market effects

Toru Kikuchi

Canadian Journal of Economics, 2005, vol. 38, issue 3, pages 870-882

Abstract: This study develops a model of trade that highlights the effects of the interconnection of country-specific communications networks as a driving force behind trade in high-tech products with positive transport costs. By constructing a two-country model of monopolistic competition with two production factors, it is shown that the locational decisions of firms may magnify the influence of interconnected networks. In a reversal of the standard home market effects, the abundance of unskilled labour in the developing countries can attract high-tech firms from the developed countries.

JEL-codes: D43 F12 L13 (search for similar items in EconPapers)
Date: 2005
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