TY - JOUR
T1 - The spatial selection of heterogeneous quality
T2 - An approach using different demand elasticities
AU - Chen, Ching mu
AU - Zeng, Dao Zhi
PY - 2014/6
Y1 - 2014/6
N2 - This paper incorporates heterogeneous demand elasticities and the quality/skill complementarity of production in a footloose capital model in order to explain the spatial selection of firms with differentiated quality. We find that when trade becomes freer, high-quality firms agglomerate in the region that accommodates more high-skilled labor, whereas low-quality firms move to the region that hosts more low-skilled labor. If trade freeness is high, the spatial separation of high- and low-quality firms occurs. This paper also points out the positive effect of integration on welfare owing to the specialization of product quality.
AB - This paper incorporates heterogeneous demand elasticities and the quality/skill complementarity of production in a footloose capital model in order to explain the spatial selection of firms with differentiated quality. We find that when trade becomes freer, high-quality firms agglomerate in the region that accommodates more high-skilled labor, whereas low-quality firms move to the region that hosts more low-skilled labor. If trade freeness is high, the spatial separation of high- and low-quality firms occurs. This paper also points out the positive effect of integration on welfare owing to the specialization of product quality.
KW - Quality heterogeneity
KW - Sep economic geography
KW - Sep heterogeneous demand elasticity
KW - Sep spatial selection
KW - Sep trade liberalization
UR - http://www.scopus.com/inward/record.url?scp=84899727793&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84899727793&partnerID=8YFLogxK
U2 - 10.1111/ijet.12035
DO - 10.1111/ijet.12035
M3 - Article
AN - SCOPUS:84899727793
SN - 1742-7355
VL - 10
SP - 179
EP - 202
JO - International Journal of Economic Theory
JF - International Journal of Economic Theory
IS - 2
ER -