Interconnected communications networks and home market effects
This study develops a model of trade that highlights the effects of the interconnection of country-specific communications networks as a driving force behind trade in high-tech products with positive transport costs. By constructing a two-country model of monopolistic competition with two production factors, it is shown that the locational decisions of firms may magnify the influence of interconnected networks. In a reversal of the standard home market effects, the abundance of unskilled labour in the developing countries can attract high-tech firms from the developed countries.
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Volume (Year): 38 (2005)
Issue (Month): 3 (August)
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