Haiwen Zhou

Population Growth and Industrialization

The role of population growth in the process of industrialization is studied in a general equilibrium model. It provides a formal presentation of Rostow’s insight of the role of a leading sector in industrialization. Population growth may lead to a shortage of food and a breakdown of the industrialization process. However, population growth may benefit the manufacturing sector in the adoption of increasing returns to scale technologies. Elasticity of demand for agricultural goods plays an important role in determining whether an improvement of agricultural technology or an increase of population is beneficial to the manufacturing sector. A comparison of China and Britain before the Industrial Revolution shows that research and development are necessary for sustained growth. Achieving industrialization independently requires a combination of a sufficiently large market size from the demand side and a sufficiently large supply of technologies from the supply side. (JEL O14, E10, N10, Q01)

Oligopolistic Competition and Economic Geography

This paper studies a general equilibrium model of economic geography in which firms engage in oligopolistic competition. This framework is conducive to analytic results. With increasing returns, oligopolistic competition leads to interindustry trade between regions rather than intraindustry trade. The choice of appropriate technology is a channel of concentration of industries.

Market Structure and Organizational Form

This article studies the determinants of a firms organizational form in the context of an imperfectly competitive industry. There are two kinds of organizational forms: the multidivisional form (M-form) and the unitary form (U-form). An M-form firm suffers from ignorance of demand externalities among different products and double marginalization is eliminated. In contrast, in a U-form firm, demand externalities are taken into consideration and double marginalization exists. A firms optimal choice of organizational form depends on the market structure.

Internal Rebellions and External Threats: A Model of Government Organizational Forms in Ancient China

In ancient China, a ruler needed to handle both internal rebellions and external threats. To decrease the possibility of internal rebellions, a ruler could organize the government to establish the division of power among ministers. While effective in preventing internal rebellions, this approach could make the defense of the country against external threats less effective. The trade-off between preventing internal rebellions and dealing with external threats in a rulers choice of government organizational form is affected by factors such as the size of the population, the level of coordination efficiency, and the degree of increasing returns to the military sector. If the magnitude of external threats increases, regardless of the type of equilibrium organizational form, the equilibrium level of the concentration of power among division heads increases.

Factor Returns and Circular Causality

The presence of circular causality in a region through factor returns is studied in a general equilibrium model in which firms producing final products engage in oligopolistic competition. The intermediate input is produced by capital and labor with a constant returns to scale technology. If the degree of increasing returns in the production of final products is sufficiently high, the return to a factor can increase with the amount of this factor. Thus a higher amount of a factor in a region leads to a higher return to this factor and attracts additional amount of this factor to move in. Capital movement and labor movement can be reinforcing. This type of circular causality means that unbalanced regional development can persist over time.

A Ricardian Model of International Trade with Oligopolistic Competition

This paper studies a Ricardian model of international trade with a continuum of products in a general equilibrium model in which firms engage in oligopolistic competition. It provides a bridge between trade models based on perfect competition and models based on imperfect competition. Compared with a model based on perfect competition, the incorporation of fixed cost leads to the result that an increase of domestic labor may increase the relative wage of the domestic country.

Impact of international trade on unemployment under oligopoly

ABSTRACT By studying a two-sector general equilibrium model in which firms engage in oligopolistic competition and unemployment is a result of the existence of efficiency wages, we derive the following results analytically. A countrys comparative advantage in producing manufactured goods increases with the level of efficiencies in the labor market. The opening of international trade leads to the equalization of wage rates even though countries differ in their factor endowments and labor market efficiencies. If countries have the same level of labor market efficiencies but differ in their endowments of labor and land, the opening to international trade leads to an increase in the wage rate in both countries.

A Model of Institutional Complementarities in Ancient China

In ancient China, the county system and feudalism were the possible government organizational forms. Government officials might be selected through recommendations and examinations. The centralization of authority in the hands of emperors was achieved through a group of institutions such as the county system, the Imperial Examination System, and the division of authority among government officials. This paper provides a systematic interpretation of the interrelationship among this group of institutions and studies institutional complementarities in a model. It is shown that an increase in the degree of increasing returns in the military sector will increase the ruler’s incentive to adopt the county system. Institutional complementarities between the adoption of the Imperial Examination System and the division of authority among officials under the county system are established. A decrease in the level of coordination costs of elite increases the ruler’s incentive to choose a higher degree of the division of authority.

International R&D Tournaments and Industrial Policy

This paper provides a unified approach to study the influence of uncertainty and spillovers on the direction of R&D policy when firms engage in international R&D competition. When the reward to the winner is exogenously given, it is shown that whether a government will tax or subsidize its firm is sensitive to the type of uncertainty that characterizes the R&D process. When the reward to the winner is endogenously determined by R&D spending, the direction of optimal policy is not only sensitive to the type of uncertainty, but also sensitive to the degree of spillovers.