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Intermediate Inputs And External Economies, Haiwen Zhou
Intermediate Inputs And External Economies, Haiwen Zhou
Economics Faculty Publications
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 firm level is necessary …
International Trade With Increasing Returns In The Transportation Sector, Haiwen Zhou
International Trade With Increasing Returns In The Transportation Sector, Haiwen Zhou
Economics Faculty Publications
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 firms 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.