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GENERAL EQUILIBRIUM OF SPATIAL PRODUCT AND LABOR MARKETS *
Author(s) -
Kohlhase Janet E.,
Ohta Hiroshi
Publication year - 1989
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.1989.tb01243.x
Subject(s) - economics , profit (economics) , productivity , general equilibrium theory , product market , returns to scale , microeconomics , factor market , supply and demand , perfect competition , labour economics , production (economics) , macroeconomics , incentive
ABSTRACT A simple general equilibrium model relates spatial product markets and spatial labor markets. The firm is treated as being a spatial monopolist or as a Löschian competitor in the output market and as a spatial monopsonist in the labor market. Derived free spatial demand and free regional labor supply are defined, and their properties examined. The model provides the framework for analyzing the impact of a technological improvement in labor productivity on the structure of the spatial markets. The impact of entry on spatial labor supply is an important determinant of whether or not entry lowers wages and raises output prices. Unlike the spaceless competitive paradigm, zero‐profit long‐run equilibrium can occur in a space economy under conditions of increasing returns to scale.