Monopolistic competition without apology
Глава содержит понятийный аппарат теорий межрегиональной и международной торговли, классические, неоклассические и новые теории и модели межрегиональной торговли,
Standard measures of competitive toughness fail to capture the fact that, as consumers optimize intertemporally, firms operating today compete with (yet non-existent) businesses which will be started tomorrow. We develop a two-tier CES model of dynamic monopolistic competition in which the impact of product differentiation on the market outcome depends crucially on the elasticity of intertemporal substitution (EIS). The degree of product differentiation per se fails to serve as a meaningful indicator of competitive toughness: what matters is its cross-effect with EIS. We also extend the model to the case of non-CES preferences to capture variable markups.
We develop an economic geography framework with positive trade costs in both manufacturing and traditional sectors, mobile skilled workers, and unequal shares of unskilled labour in regions. We show that partial agglomeration always features the home market effect (HME) regardless of whether regions trade only the manufacturing good or both. Moreover, spatial factor mobility is significant for the HME to arise while intersectoral mobility does not play a crucial role. Furthermore, a decrease in the traditional sector trade costs makes the HME weaker, and increases the likelihood of full agglomeration in the larger region. Finally, we show that a small departure from Cobb-Douglas upper-tier utility towards gross substitutability of manufacturing and traditional goods reinforces the HME while the opposite holds for gross complementarity of goods.