Input substitutability, trade costs and location

Tomasz Michalski (1)

1 GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC

Constant unit manufacturing costs are lower (higher) in high wage North when inputs are (i) tradeable, (ii) country-specific and (iii) the elasticity of substitution between them is below (above) one. A two-country model of firm entry/location is considered.

Keywords: MANUFACTURING industries; COST analysis; ELASTICITY (Economics); SUBSTITUTION (Economics); MARKET entry; ECONOMIC models; INDUSTRIAL location; WAGES

Domains: Humanities and Social Sciences; Economics and Finance; Economy and decision science

Tomasz Michalski. Input substitutability, trade costs and location. Economics Letters, 2012, 117 (1), pp.57-59. ⟨10.1016/j.econlet.2012.04.105⟩. ⟨hal-00738265⟩