Firm Heterogeneity, Technology Utilization, and International Fragmentation

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

View graph of relations

Author(s)

  • Taiji FURUSAWA
  • Chia Hui LU

Related Research Unit(s)

Detail(s)

Original languageEnglish
Publication statusPublished - 2007

Abstract

We study heterogeneous firm’s optimal decision on technology utilization and the extent of international fragmentation in a monopolistic competition, general equilibrium North-South trade model. The production of the manufactured goods requires the inputs of intermediate goods, which can be produced either in the North or South. We show that firms may not utilize all available intermediate goods and if the elasticity of substitution between intermediate goods in the manufacturing is smaller than the elasticity of substitution in consumption between varieties of the manufactured good, the firm with a lower capacity to utilize the intermediate goods uses only the subset of the intermediate goods that the firm with a higher capacity. When they have an option of fragmenting their production process and shifting a part to the South, firms with higher capacity tend to do so, while firms with lower capacity remain in the North.

Citation Format(s)

Firm Heterogeneity, Technology Utilization, and International Fragmentation. / FURUSAWA, Taiji; LU, Chia Hui.

2007.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review