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International Trade with Increasing Returns in the Transportation Sector

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  • Haiwen Zhou

    (Department of Economics, Old Dominion University, Norfolk, VA 23529, USA)

Abstract

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.

Suggested Citation

  • Haiwen Zhou, 2014. "International Trade with Increasing Returns in the Transportation Sector," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 9(4), pages 606-633, December.
    • Handle: RePEc:fec:journl:v:9:y:2014:i:4:p:606-633
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0028-0
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    Cited by:

    1. Haiwen Zhou, 2021. "Fixed Costs and the Division of Labor," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 63-81, May.
    2. Haiwen Zhou, 2019. "Coordination Costs, Market Size, and the Choice of Technology," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 14(1), pages 131-148, March.
    3. Colburn, Christopher & Zhou, Haiwen, 2021. "The Partition of Production between Households and Markets," MPRA Paper 107158, University Library of Munich, Germany.

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    More about this item

    Keywords

    transportation costs; international trade; the choice of technology; increasing returns; strategic complementarity;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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