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The Choice Of Technology In Economic Development, Lei Wen, Haiwen Zhou
The Choice Of Technology In Economic Development, Lei Wen, Haiwen Zhou
Economics Faculty Publications
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 …
Fixed Costs And The Division Of Labor, Haiwen Zhou
Fixed Costs And The Division Of Labor, Haiwen Zhou
Economics Faculty Publications
How market size and the level of coordination costs determine the degree of specialization is studied in an infinite horizon model with the amount of capital determined endogenously. Firms producing the same intermediate good engage in oligopolistic competition and choose the degree of specialization of their technologies to maximize profits. A more specialized technology is a technology with a lower marginal cost, but a higher fixed cost. Interestingly, the relationship between the level of coordination costs and a firm’s degree of specialization is ambiguous. A firm in a country with a larger market size, more patient citizens, or a higher …