Abstract The Core–Periphery model in the new economic geography, which considers the single migration of workers driven by real wage inequality among regions, is extended to incorporate the migration of firms driven by real profit inequality among regions. In this dual‐migration model, the behavior of solutions is qualitatively similar to that of single‐migration models. That is, (1) spatially homogeneous population distributions become destabilized and eventually form several cities where both firms and workers agglomerate; (2) the number of cities decreases as transport costs decrease. These results provide a more general theoretical justification for the use of single‐migration models.
From the viewpoint of industrial organization, industry clusters are recognized as being crucial to economic development. However, the analysis of monetary policy as portrayed in the existing literature does not seem to consider this feature. This study seeks to make up for this deficiency from the perspective of industrial organization. By considering the feature of industry clusters in a monopolistic competition model, this paper finds that the optimal money growth rate is positively related to the extent of firm cluster congestion, while it is negatively related to the extent of the preference for diversity and the degree of monopoly power.
Despite falling unionization rates, the union wage premium remains a robust empirical regularity. To shed light on this contrasting wage impact of unions, we develop a union wage model with firm heterogeneity and a social insurance system. In the absence of a fiscal sector, greater bargaining power raises union wages and lowers nonunion wages. In contrast, when unemployment benefits adjust endogenously to balance the government budget, greater bargaining power instead lowers union wages and raises nonunion wages. Our results suggest that understanding the wage impact of unions depends critically on the interaction between firm heterogeneity and the social insurance system.
Social platforms have triggered global systemic crises in data security and tax governance, with acute contradictions between operational models and regulatory frameworks-urging exploration of sustainable paths via collaborative regulation. This paper constructs a differentiated duopoly model to comparatively analyze, from the perspective of regulatory mechanisms, the impacts of different regulatory approaches on digital services and regulatory strategies of social platforms within a platform ecosystem composed of the government, social platforms, and users. The results show that the equilibrium strategies of both social platforms and the government are contingent upon the marginal value of user personal data obtained. Counterintuitively, government regulation may exhibit heterogeneous impacts on two homogeneous social platforms. Moreover, compared with government regulation, collaborative regulation does not necessarily lead to a win-win situation. These findings provide important theoretical foundations and policy prescriptions for data market regulation and sustainable development in the platform economy.
We construct a four-sector general equilibrium model, with a transport sector facilitating commodity trade, to examine the impacts of an oil price shock on skilled-unskilled wage inequality in an oil-importing country. An oil price shock increases transport costs, and this in turn triggers resource reallocation through changes in the relative price of exported and imported goods. Even though both the skilled and the unskilled wage move in the same direction, their relative change depends on the pattern of commodity trade and production structures. This inter-sectoral resource allocation channel, as well as the role of commodity trade patterns, remain unexplored in the existing literature.
We examine firm's risk-taking decisions in R&D under two different delegation strategies between partial delegation (PD) and full delegation (FD): FD authorizes both quantity and R&D risk but PD only authorizes quantity. Cournot firms under the FD set higher profit weights at the expected value of cost realization, which can lessen competition, but the R&D risk choice is always lower than the PD. The results are reversed for Bertrand firms, making the FD strategy more beneficial for consumers and society. Finally, endogenous choice of delegation type depends on product substitutability and market size, while the equilibrium choice may not be socially desirable.
This paper examines the conditions under which Pareto gains can arise from allowing migration into a duty-free zone in which, by paying a fee, domestic households can supply their labor at international wages. A duty-free zone can be considered a non-linear redistribution scheme for compensation of losers from migration that forces workers to self-select. This scheme is incentive compatible, as it is based on information about the entire distribution of workers in the population, and does not require knowledge of individual information.
Early humans undertook multiple waves of migration out of Africa and back to the continent. We explore prehistoric human migration in a two-region Malthusian growth model. Whether migration occurs depends on the migration cost, relative population size, relative land supply, and relative hunting-gathering productivity between regions. Suppose one region is initially uninhabited. Then, a lower migration cost leads to migration and a larger human population. Back migration occurs when hunting-gathering productivity and supply of natural resources in the foreign region decrease relative to the home region, which provides an economic rationale for the multi-directional "shuttle dispersal model" of prehistoric human migration out of and back to Africa.
We investigate firms' strategic incentives to adopt environmental corporate social responsibility (ECSR) in the presence of quality-cost differences within a vertically differentiated duopoly. We find that (i) the low-quality firm chooses a higher (lower) ECSR level than the high-quality firm when the low-quality firm has a relatively more (less) quality-cost advantage than the high-quality firm, (ii) both firms achieve higher profits by adopting ECSR compared to the case with no ECSR, leading both firms to endogenously choose ECSR regardless of quality-cost differences, and (iii) when both firms can commit to cooperative ECSR, the resulting strategic level is higher than under non-cooperative ECSR.
We analyze the role of vertical structure in wage inequality. By constructing general equilibrium models, we consider scenarios with unemployment, full employment, and separated unskilled labor markets. In an economy with unemployment, a reduction in the regulated upstream price will widen wage inequality if the substitution elasticity of factors in the variable cost is sufficiently small. In an economy with full employment, a decrease in the regulated upstream price will expand wage inequality. In an economy with separated unskilled labor markets, the results in the two aforementioned situations still hold. We further discuss how regulated upstream pricing affects social welfare.
This study develops a dynamic two-country model with trade costs linked to international infrastructure stock. With variable markups and firm heterogeneity, the welfare impact of trade costs depends on firms' cost distribution. Governments engage in a dynamic public investment game, leading to multiple steady states. The dynamic equilibrium of the noncooperative policy game may exhibit history dependency; a small (large) initial infrastructure stock results in decreasing (increasing) infrastructure over time, leading to autarky (freer trade). Comparing these outcomes with international cooperation reveals that cooperation achieves a higher steady-state infrastructure stock and helps avoid a "low development trap."
The main purpose of this paper is to generalize some recent results obtained by Chilarescu and Manuel Gomez. Essentially, we are trying to study the effect of elasticity of substitution on the parameters of economic growth, based on its two possible values - lower and higher than one. We show that a higher elasticity of substitution increases per capita income, the relative share of physical capital, the common growth rate and the share of human capital allocated to the production sector, and this property is not affected by the position of the elasticity of substitution - below or above one.
We analyze the endogenous choice of competition mode by introducing a common supplier into a vertical structure. Contrary to previous findings, we derive that when choosing a competition mode, firms consider two opposing factors: (i) the horizontal effect arising from competition with a rival firm, and (ii) the vertical effect, which influences the price charged by the common supplier. When the common supplier adopts uniform pricing, if the both products are somewhat differentiated, the vertical effect becomes more important than the horizontal effect, making the price contract the dominant strategy. On the other hand, if the products are sufficiently homogeneous and the horizontal effect is more important than the vertical effect, both firms will choose a quantity contract. Meanwhile, when the common supplier adopts discriminatory pricing, choosing a quantity contract becomes the unique equilibrium. Finally, if the both products are somewhat differentiated, each firm's profit is higher under price competition than under quantity competition.
For a second-price common value auction with an “almost all-inclusive ring,” we analyze whether the auctioneer should reveal the ring's presence, and if so, whether this revelation should be public or private to the nonring bidder. We show that for a family of value functions, public revelation induces the nonring bidder to bid higher than in a noncooperative scenario. This implies that the auctioneer may improve his position this way. On the other hand, it highlights a new tactic that an auctioneer may use to manipulate bidder behavior by creating the false impression of collusion to induce higher bids.
This paper investigates Cournot competition between two firms, where the government offers subsidies to one firm to attract it to the government's objective region. If the firm accepts the offer, it incurs additional costs because the government's objective region is not the firm's optimal location. I find that a firm receiving the offer accepts it when the subsidy is larger than the additional cost in a perfect information situation. However, if the additional cost is the firm's private information, a situation exists where the firm accepts the offer even if the additional cost is larger than the government's subsidy.
This paper develops a differentiated duopoly model to investigate the optimal environmental R&D (ER&D) risk choices of firms with cross-ownership under an emission tax. The results show that when firms hold shares in each other, cross-ownership incentivizes firms to undertake greater ER&D risks. The private incentive for ER&D risk is lower than the social incentive when the emission tax rate is low relative to the marginal environmental damage. However, a higher share of cross-ownership can bring the private optimum closer to the social optimum under certain conditions. We also find that under unilateral shareholding, a firm partially owned by its rival assumes higher ER&D risk than the firm owning its shares, but both take on less risk than under cross-ownership. Finally, we show that ER&D risk is higher under Bertrand competition than under Cournot competition.
We model a stochastic dynamic optimization problem for the government and bank, targeting growth and inflation. These significant objectives are not necessarily aligned. We use a dynamic strategic interaction model under uncertainty, where the two parties involved take decisions alternately. We posit a suitable cost of deviation and joint value function to be optimized. We also demonstrate target achievability and provide real empirical and simulated numerical results that support our conclusions. We highlight that duality leads to a trade-off and, due to staggered decision making, fluctuations in target achievement are inevitable and not proof of inefficiency.
This paper explores the government's role in higher education policy within a dual economy, where skilled workers invest in higher education while unskilled workers do not. The novel question is whether the government should refrain from subsidizing higher education while imposing regulations, supporting a restricted, elitist system. I demonstrate that under an optimal linear income tax, government favors a restricted system. Through simulations, I show that this result also holds under a nonlinear system. Concerning developing countries, their preference for a restricted system is even more pronounced, and if trapped in a low equilibrium, international institutions can provide enhancing social welfare subsidies.
This paper analyzes, in the institutional context of globalized market economies, the competition between skilled and unskilled workers and between workers and capital owners ("capitalists"). We consider a directed technical change model with R&D and relocation of production from an innovative to a follower region. Relocations leverage the follower region's comparative advantages and improve resource allocation on a global scale. Consequently, resources are freed up for R&D, benefiting internationally available technological knowledge and ensuring higher economic growth and wages, with reduced inter-region wage inequality. These effects can be enhanced by governmental actions promoting relocations or the producers' market power. Relocations benefit all economic agents' welfare through larger consumption levels and economic growth. But the actions of a region's government promoting market power impacts workers' and capitalists' welfare differently. The workers' welfare is affected by market power through two effects of opposite signs (it penalizes consumption but favors economic growth), while the capitalists' welfare is always improved by more market power. Accordingly, both capitalists and workers favor market power, but the former favor it more than the latter. Lower economic growth exacerbates the circumstances leading to conflict between workers and capitalists.
