A model of regional economic development with increasing returns

This paper develops mathematically and empirically tractable regional and interregional model of economic devel-opment with increasing returns to scale (IRS) under the neoclassical assumptions. A one-sector, two-region model in which one region exhibits IRS is presented and the whole nation presents constant returns to scale. The development of the local IRS economy is shown to be constrained to a “moving equilibrium” path. The preliminary empirical results are sufficiently supportive of the argument to encourage further research along the lines of the model. In particular, the neoclassical model does not predict negative coefficients on the real rental value of capital in regressions explaining population or employment relative to that in the nation.

International Trade with Increasing Returns in the Transportation Sector

In this general equilibrium framework, the transportation sector is modeled as a distinct sector with increasing returns. A more advanced technology has a higher fixed cost but a lower marginal cost of production. Even with both manufacturing finns and transportation firms engaged in oligopolistic competition and optimally choosing their technologies, the model is tractable and results are derived analytically. Technology adoptions in the manufacturing sector and transportation sector are reinforcing, and multiple equilibria may exist. Firms choose more advanced technologies and the prices decrease when the size of the population is larger.

The Roots of Great Power Competition:An Analysis Based on the Increasing Returns Mechanism

Geopolitics,technology and international institutions are three major areas of great power competition.In the analysis of great power relations,both the balance of power theory and the hegemony theory rely on the assumption of diminishing returns and ignore the possibility of increasing returns.Increasing returns play an extensive role in geographical location,technological evolution and institutional change;accordingly,the increasing returns mechanism in great power relations is reflected in the geopolitical competition,technological competition and international institutional competition of great powers.The rational expectation that initial advantages will be transformed into long-term advantages through the mechanism of increasing returns drives great powers into competition whether they are rivals or allies.As specific mechanisms leading to increasing returns,coordination effects operate in geopolitical competition,technological competition and international institution competition;learning effects are found in technological competition and international institution competition;and adaptive expectations play a part in international institution competition.Various cases,ranging from the Anglo-Dutch rivalry over maritime hegemony in the 17th century to the current US-European competition over international investment arbitration regimes,show that great power competition derives from the logic of increasing returns.

A PATH-DEPENDENT MODEL OF INVESTMENT AND EMPLOYMENT FLOW IN A LARGE ECONOMY IN A PROCESS OF INTEGRATION

This paper meant to analyze the spatial evolution of a large country in its process of integration with the world economy in general, and, to look into the possible effect of China′s accession into WTO on the future development of its spatial economy in particular. Through an approach of increasing returns, external economy, product differentiation and path-dependence, with foreign trade costs incurred by different regions within the large country discriminated, a model of investment and employment flow is developed as a simulation of a large country′s process of integration with the world economy. The modeling indicates that in the process of integration, as there exist differences in foreign trade costs among different regions within the large country, either the spatial economy of the country deviates from its symmetric structure in autarky and falls into a core-periphery relationship, or the effect of industrial agglomeration is reinforced, amplified and locked in, if the agglomeration had been started. The economic gap on either the aggregate or structural basis between different regions within the large country will increase rapidly as the integration proceeds.

The Choice of Technology and Rural-Urban Migration in Economic Development

This paper studies a general equilibrium model of rural-urban migration in which manufacturing finns engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Urban residents incur commuting costs to work in the Central Business District. Surprisingly a change in the size of the population or an increase in the exogenously given wage rate will not affect a manufacturing finn＇s choice of technology. This helps to explain why finns in developing countries may not adopt labor intensive technologies even under abundant labor supply. An increase in the number of manufacturing finns increases both the employment rate and the level of employment in the manufacturing sector. However, manufacturing finns choose less advanced technologies. Capital accumulation leads manufacturing firms to choose more advanced technologies, but may not increase employment in the manufacturing sector.

A Dynamic Model of the Choice of Technology in Economic Development

In this overlapping-generations model, there is unemployment in the manufacturing sector. Manufacturing firms engage in oligopolistic competition and choose technologies to maximize profits. With capital as a fixed cost of production, increasing returns in the manufacturing sector exist. In the unique steady state, first, when individuals become more patient, the savings rate increases while the level of an individual＇s income decreases. Second, an increase in population or percentage of income spent on manufactured goods does not change steady-state technology while the level of an individual＇s income decreases. Third, an increase in the wage rate leads manufacturing firms to choose more advanced technologies and the steady-state capital stock increases. Finally, an increase in the level of subsidies to technology adoption does not change steady-state technology.

Intermediate Inputs and External Economies

Is the degree of external economies （at the industry level） higher than the degree of internal increasing returns （at the firm level）？ If so, what is the exact source of this difference？ In the general equilibrium model in which firms producing final goods choose the degree of specialization of their technologies, external economies arise from the usage of intermediate inputs and the existence of internal increasing returns. It is frequently assumed that increasing returns are absent at the firm level while present at the industry level. In this model, the existence of increasing returns at the form level is necessary for the existence of external economies at the industry level. We show that the degree of external economies increases with the level of linkage effects. However, a higher linkage effect does not always lead firms to choose more specialized technologies.