Market Size, Technology Choice, and Market Structure

We introduce technology choice into a model of monopolistic competition and analyze the structural effects of changes in market size. A larger market leads to the adoption of a large-scale technology. If a technology switch occurs, the number of firms decreases, and a rationalizing effect arises: individual and aggregate output increases; prices fall. This need not benefit consumers since a technology switch is associated with a decrease in product variety.     

Sunk Costs, Market Access, Economic Integration, and Welfare

The nature of the equilibrium that arises after economic integration is shown to depend crucially on how initial entry costs are divided along two separate dimensions: market access versus technology costs, and fixed versus sunk costs. There are three post-integration equilibrium regimes: a traditional trade theory regime which arises when both market access costs and fixed costs are small, a new trade theory regime which arises when market access costs are small but fixed costs are high, and a market access regime which arises when market access costs are high. While the first two regimes have already appeared in the literature, the third is new. The sign, magnitude, and qualitative behavior of the welfare effects of integration across all three regimes depend on the configuration of these costs.     

Prices Versus Quantities: Technology Choice,Uncertainty and Welfare

Technological improvements have proven essential in mitigating environmental problems such as climate change, depletion of the ozone layer and acid rain. While it is well-known that price- and quantity-based regulatory instruments provide different investment levels, the effects on the choice between different technologies have received scant attention. This paper expands on the prices versus quantities literature by investigating firms’ technology choice in the face of demand and supply side uncertainty. I show that the regulator can not design tradable emissions permits and an emissions tax such that the two regimes are equivalent, even in terms of expected values. Moreover, a tax encourages the most flexible abatement technology if and only if stochastic costs and the equilibrium permit price have sufficiently strong positive covariance, compared with the variance in consumer demand for the good produced. Finally, the firms’ technology choices are socially optimal under tradable emissions permits, but not under an emissions tax.     

Coordination Costs,Market Size,and the Choice of Technology

Impact of coordination costs and market size on a firm's choice of technology is studied in a general equilibrium model in which finns engage in oligopolistic competition. A firm establishes an organizational hierarchy to coordinate its production. First, it is shown that an increase in market size leads a firm to choose a more specialized technology. Second, surprisingly, a robust result is that an increase in the level of coordination efficiency leads a firm to choose a less specialized technology.     

Welfare and Integration

This article argues that the terms‐of‐trade and volume‐of‐trade taxonomy from the theory of tariffs constitutes an attractive alternative to Viner's trade diversion and creation effects for the analysis of preferential trading arrangements. In applications of the alternative approach, the article establishes that results by Lipsey and Riezman on large versus small preunion trade flows for choice of partners are not ‘contradictory’ and that under some conditions a small country's optimal strategy is to seek membership of multiple free‐trade areas.     

Integration, Fragmentation and the Geography of Welfare

The welfare effects of trade integration with endogenous production technology are examined in a monopolistic competition framework. In addition to explaining industry location, trade patterns and accompanying effects on local welfare, the analysis highlights the endogenous change in the costs of supervising fragmented production when economies open up to trade. By regarding fragmentation as a skill‐intensive activity, factor proportions (rather than size) strongly affect the international distribution of gains from trade. Nevertheless, albeit not generally, for a wide range of parameter values, even a skill‐poor country can participate in the gains—despite loss of industry.     

International Integration, Risk and the Welfare State

How does international integration affect the welfare state? Does it call for a leaner or an expanded welfare state? International integration may affect the distortions caused by welfare state activities but also the risks motivating social insurance mechanisms. This paper addresses these potentially counteracting effects in a fully specified intertemporal two–country stochastic endowment model, focusing on the implications when product market integration reduces trade frictions across national product markets. It is shown that lower trade frictions may increase the marginal costs of public funds, which gives an argument for reducing (steady–state) public consumption. However, tighter integration of product markets unambiguously leads to more variability in private consumption, and this gives a case for expanding the social insurance provided via state–contingent public sector activities (automatic stabilizers). JEL classification: E30; F10; H11     

Market Segmentation, Market Integration, and Tacit Collusion

Moving from market segmentation to market integration (firms cannot discriminate among markets) is shown to have often anticompetitive effects in an infinitely repeated Cournot game. In particular, market integration between two countries leads both of them to experience anticompetitive effects when product markets are similar. The same conclusion holds when trade liberalization is modeled as a decrease in bilateral trade barriers followed by moving from market segmentation to market integration. The analysis also predicts that a less efficient country (like a country in transition) enjoys pro–competitive effects from market integration.     

Market, Trade and Welfare in General Equilibrium

This paper develops a tractable general equilibrium model of an economy with an arbitrary number of industries under increasing returns to scale and imperfect competition. The market structure of the model economy is expressed by two basic sets of parameters: the degree of competition, and the markup ratio prevailing in each industry. The government is supposed to control the degree of competition through antitrust policy and the markup ratio through entry policy. Using this model, I re-examine the results of traditional competitive equilibrium analysis and explore the effects of competition policies on economic welfare and international trade.
JEL Classification Numbers: D43, D50, F11, F12, L13, L41.     

Technology Transfer,Welfare, and Wage Inequality

We use a linear two‐country, two‐factor, two‐product, two‐different technologies (2×2×2×2) model to study technology transfer and its effects on each country's welfare and factor prices. We demonstrate that technology transfer could benefit both the recipient and the transferring countries. For the recipient country, technology transfer increases the price of the factor that is more intensively used and decreases the price of the other factor. Our results provide an alternative explanation of a trend observed in the past half century: a rise in real wage inequality between relatively skilled workers and less‐skilled workers because of technological progress in numerous countries.     

Paretian Welfare Judgements and Bergsonian Social Choice

Two distinct approaches can be identified in the new welfare economics. The school of thought based on the compensation principles attempted to see what can be said about social welfare without making interpersonal comparisons of well-being by extending the applicability of the Pareto principle through hypothetical compensatory payments between gainers and losers. The Bergson-Samuelson school of thought introduced the social welfare function as a formal method of introducing a Pareto-inclusive ethical belief on social welfare, whose policy implications we should theoretically explore. Synthesising these two approaches, this paper identifies a condition under which the new welfare economics is logically impeccable.     

Labor Market Integration, Unemployment, and Transfers

Integration of the labor markets between a rich country (North) and a poor country (South) often leads to high unemployment in the South and transfers from North to South; for instance: United States versus Puerto Rico, West versus East Germany, Northern versus Southern Italy. This paper presents a general equilibrium model in which workers finance a transfer to the unemployed in the South in order to limit migration. In addition, it extends the framework to consider: the difference in efficiency between natives and immigrants, taxes on fixed factors in the North with internal transfers, and subsidies to the employed in the South.     

The Welfare State, Budgetary Pressure and Labour Market Shifts

Public debate about the welfare state in OECD countries has emphasized the need for reform to meet a twofold set of shocks: budgetary pressure and a labour market shift against unskilled workers. The aim of the paper is to set out a framework for examining the implications of these shocks for the optimal scale of social transfers and, in particular, the impact on different societies, distinguishing a restricted welfare state, labelled "the United States" and a more extensive welfare state, labelled "Continental Europe".     

Public Procurement, Market Integration, and Income Inequalities

Aggregate demand externalities are the source of the cumulative processes of the new economic geography. In this paper these externalities drive the endogenous emergence of the pattern of international specialization in integrating economies. A distinguishing feature of this work is that it considers two aspects of market integration simultaneously: reduction of trade costs, and liberalization of the public procurement market. The first dimension has been widely studied. Adding the second dimension, which is on the policy agenda of the WTO and the EU, yields insights concerning the pattern of international specialization, income inequalities, and welfare.     

Choice of Technology and Labour Market Consequences: An Explanation of US-Japanese Differences

This paper provides an explanation for U.S.-Japanese differences concerning continuous process improvement, turnover rate, and the level and firm-specificity of human capital accumulation. Connection between continuous process improvement and the firm-specificity of training causes multiplicity of equilibria. In the Japanese equilibrium, each firm conducts continuous process improvement because other firms do so, and as a consequence training provided by such a firm becomes less effective in other firms. This lowers the turnover rate, which, in turn, increases firms' incentives to train employees. In the US equilibrium, training is general, which raises the turnover rate and decreases incentives to train.     

Market Structure,Competition, and Welfare Change Due to Technological Innovations

This paper analyzes the change in social welfare brought about by a cost-reducing technological innovation. Each firm adopts a new technology at the expense of the other firms. Hence, competitive adoption of new technology can reduce social welfare. Because a technological innovation can change market structure in different ways under different kinds of competition it can cause quantity competition to generate greater social welfare than price competition does. [020]     

Product Market Integration,Rents and Wage Inequality

Globalization in the form of product market integration affects labor markets and produces winners and losers. While there are aggregate gains, it is in general ambiguous how inequality is affected. We explore this issue in a Ricardian model and show that it depends on the balance between “protection” and “specialization” rents. In particular, wage inequality among similar workers (residual wage inequality) may be U ‐shaped, at first decreasing and then increasing in the process of product market integration. Consequently, there may be gains in both the efficiency and the equity dimension until integration reaches a certain level at which a trade‐off arises.     

Potential Welfare Criteria and the Choice of Large Projects

This note compares project evaluation rules for large projects by Negishi (1962) and Harris (1978) and points out that the extensions by Harris depend on his implicit weakening of the criterion for potential welfare improvement compared with Negishi's original welfare criterion.
JEL Classification Number: D61.     

竞争市场与垄断市场:一个基于福利的分析

传统经济理论认为垄断会导致社会福利的损失。在它的分析框架中。实际上瞻舍着成本不变假说，即完全竞争市场中的企业与垄断市场中的企业的成本(或边际成本)是相同的。规模经济理论告诉我们，规模大的企业更容易形成规模经济效果，因而垄断企业的规模经济效果是完全竞争企业不可比拟的，成本不变假说就显得很不真实。本文试图证明在某种前提(如资金密集型产业和知识密集型产业)下垄断所带来的规模经济效果能够弥补社会福利的损失，甚至使社会总福利增加。这一结论对我国市场化改革具有现实意义。     

知识、技术入股与逆向选择

对当前流行的知识、技术入股给出了一个新的解释。当知识、技术的拥有者占有越来越多的隐蔽信息时，隐蔽信息引致的逆向选择将严重地影响着知识、技术的市场交易效率，从而有利的直接定价交易难以实现。知识、技术入股，作为一项制度创新，可以在某种定程度上有效地解决隐蔽信息和逆向选择问题。