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Scale Economies, Unemployment, and Industry Agglomeration

Huan Zhao
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Huan Zhao: Jinhe Center for Economic Research, Xi'an Jiaotong University

International Trade from University Library of Munich, Germany

Abstract: This paper tries to resolve the paradox raised by Corden and Findlay (1975). In this paper, it is assumed that Manufacture sector has scale economies. Both factor prices and product prices can adjust in a general equilibrium system. In a closed economy, this paper concludes that, with the expansion of capital stock both the unemployment rate and the absolute amount of unemployment will decrease. In an open economy, this paper sets up an asymmetric model, of which only one region has fixed wage rate. It will help us to investigate how the trading cost would affect the unemployment and output of the region, which may give some helpful policy implications.

Keywords: fixed wage rate; unemployment; agglomeration (search for similar items in EconPapers)
JEL-codes: F1 F2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2005-11-09
Note: Type of Document - pdf; pages: 12
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