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Scale Economies, Unemployment, and Industry Agglomeration


  • Huan Zhao

    (Jinhe Center for Economic Research, Xi'an Jiaotong University)


This paper tries to resolve the paradox raised by Corden and Findlay (1975). In this paper, it is assumed that Manufacture sector has scale economies. Both factor prices and product prices can adjust in a general equilibrium system. In a closed economy, this paper concludes that, with the expansion of capital stock both the unemployment rate and the absolute amount of unemployment will decrease. In an open economy, this paper sets up an asymmetric model, of which only one region has fixed wage rate. It will help us to investigate how the trading cost would affect the unemployment and output of the region, which may give some helpful policy implications.

Suggested Citation

  • Huan Zhao, 2005. "Scale Economies, Unemployment, and Industry Agglomeration," International Trade 0511004, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpit:0511004
    Note: Type of Document - pdf; pages: 12

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    References listed on IDEAS

    1. Ottaviano, Gianmarco I. P., 2001. "Monopolistic competition, trade, and endogenous spatial fluctuations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 51-77, February.
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    More about this item


    fixed wage rate; unemployment; agglomeration;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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