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Interconnected communications networks and home market effects

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  • Toru Kikuchi

Abstract

. This study develops a model of trade that highlights the effects of the interconnection of country‐specific communications networks as a driving force behind trade in high‐tech products with positive transport costs. By constructing a two‐country model of monopolistic competition with two production factors, it is shown that the locational decisions of firms may magnify the influence of interconnected networks. In a reversal of the standard home market effects, the abundance of unskilled labour in the developing countries can attract high‐tech firms from the developed countries. JEL classification: D43, F12, L13 Réseaux de communication interconnectés et effets de marché intérieur. Cette étude développe un modèle de commerce international qui souligne les effets de l’interconnexion de réseaux de communications intra‐pays en tant que force majeure dans le commerce de produits de haute technologie quand les coûts de transport sont positifs. A l’aide d’un modèle de concurrence monopolistique à deux pays et à deux facteurs de production, on montre que les décisions de localisation des entreprises peuvent magnifier l’influence des réseaux interconnectés. Dans ce qui peut être considéré comme un renversement des effets de marché intérieur, l’abondance de travailleurs non‐spécialisés dans les pays en développement peut attirer les entreprises de haute technologie des pays industrialisés.

Suggested Citation

  • Toru Kikuchi, 2005. "Interconnected communications networks and home market effects," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(3), pages 870-882, August.
    • Handle: RePEc:wly:canjec:v:38:y:2005:i:3:p:870-882
    DOI: 10.1111/j.0008-4085.2005.00306.x
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    References listed on IDEAS

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    1. Jacques Crémer & Patrick Rey & Jean Tirole, 2000. "Connectivity in the Commercial Internet," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 433-472, December.
    2. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    3. van de Klundert, Theo & Smulders, Sjak, 1996. "North-South knowledge spillovers and competition: convergence versus divergence," Journal of Development Economics, Elsevier, vol. 50(2), pages 213-232, August.
    4. Oecd, 2002. "Internet Traffic Exchange and the Development of end-to-end International Telecommunication Competition," OECD Digital Economy Papers 58, OECD Publishing.
    5. Richard G. Harris, 1995. "Trade and Communication Costs," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 46-75, November.
    6. Philippe Martin & Gianmarco I.P. Ottaviano, 2021. "Growing locations: Industry location in a model of endogenous growth," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    7. Toru Kikuchi, 2003. "Interconnectivity of communications networks and international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 155-167, February.
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    Cited by:

    1. Toru Kikuchi & Kazumichi Iwasa, 2009. "Competing Industrial Standards and the Impact of Trade Liberalization:Revised and Enlarged," Discussion Papers 0913, Graduate School of Economics, Kobe University.
    2. Kikuchi, Toru & Iwasa, Kazumichi, 2010. "A simple model of service trade with time zone differences," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 75-80, January.
    3. Noritsugu Nakanishi & Ngo Van Long, 2015. "The Distributional and Allocative Impacts of Virtual Labor Mobility across Time Zones through Communication Networks," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 638-662, August.
    4. Toru Kikuchi & Kazumichi Iwasa, 2009. "Interregional trade, industrial location and import infrastructure," International Economics and Economic Policy, Springer, vol. 6(4), pages 361-365, December.
    5. Toru Kikuchi, 2008. "Distribution Costs, International Trade and Industrial Location," Economics Bulletin, AccessEcon, vol. 6(24), pages 1-5.
    6. repec:ebl:ecbull:v:6:y:2008:i:24:p:1-5 is not listed on IDEAS
    7. Toru Kikuchi & Kazumichi Iwasa, 2011. "Competing Industrial Standards and the Impact of Trade Liberalization," International Economic Journal, Taylor & Francis Journals, vol. 25(2), pages 269-284.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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