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Resource Abundance, Market Size, and the Choice of Technology

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  • Zhou, Haiwen

Abstract

How resource abundance and market size affect the choice of increasing returns technologies is studied in an overlapping-generations general equilibrium model in which manufacturing firms engage in oligopolistic competition. The model is surprisingly tractable. First, for the steady state, the wage rate, the level of technology, and capital stock are not affected by the amount of natural resources. An increase in the share of agricultural revenue going to natural resources leads to a lower wage rate and firms choose less advanced technologies. Second, an increase in market size increases the equilibrium wage rate, level of technology, and capital stock. Finally, other things equal, a country with a lower endowment of natural resources or a higher market size has a comparative advantage in producing the manufactured good.

Suggested Citation

  • Zhou, Haiwen, 2019. "Resource Abundance, Market Size, and the Choice of Technology," MPRA Paper 93096, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93096
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    Cited by:

    1. Haiwen Zhou, 2021. "Fixed Costs and the Division of Labor," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 63-81, May.
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    3. Polyzos, Efstathios & Kuck, Simon & Abdulrahman, Khadija, 2022. "Demographic change and economic growth: The role of natural resources in the MENA region," Research in Economics, Elsevier, vol. 76(1), pages 1-13.
    4. Christopher Colburn & Haiwen Zhou, 2022. "The partition of production between households and markets," International Studies of Economics, John Wiley & Sons, vol. 17(1), pages 21-35, June.

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    More about this item

    Keywords

    Technology choice; resource abundance; specific-factors model; overlapping-generations model; increasing returns;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • N60 - Economic History - - Manufacturing and Construction - - - General, International, or Comparative
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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