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We develop a general equilibrium model with three primary production factors—land, skilled, and unskilled labor—and three sectors—construction, intermediate inputs, and final consump-tion—to study how different intensities of telecommuting affect the efficiency of firms that embrace home working, as well as its impact on the whole economy. In doing so, we pay particular attention to the effects of increasing working from home (WFH) that go through changes in the production and consumption of buildings: more WFH reduces firms’ demands for office space, but increases workers’ demand for living space since additional room is re-quired to work from home. We find that more WFH is a mixed blessing: the relationship between telecommuting and productivity or GDP is ∩-shaped, whereas telecommuting raises income inequality. Hence, WFH is not a panacea since an excessive downscaling of workspaces may be damaging to all and exacerbate economic inequality.

Science parks play a growing role in knowledge-based economies by accommodating high-tech firms and providing an environment that fosters location-dependent knowledge spillovers and promote R&D investments by firms. Yet, not much is known about the economic conditions under which such entities may form in equilibrium without government interventions. This paper develops a spatial equilibrium model with a competitive final sector and a monopolistically competitive intermediate sector, which allows us to determine necessary and sufficient conditions for a science park to emerge as an equilibrium outcome. We show that strongly localized knowledge spillovers, skilled labor abundance, and low commuting costs are key drivers for a science park to form. Not only is the productivity of the final sector higher when intermediate firms cluster, but a science park hosts more intermediate firms, more researchers and more production workers, and yields greater worker welfare, compared to a counterfactual flat city. With continual improvements in infrastructure and communication technology that lowers coordination costs, science parks will eventually be fragmented.

Tech clusters play a growing role in knowledge-based economies by accommodating high-tech firms and providing an environment that fosters location-dependent knowledge spillovers and promote R&D investments by .rms. Yet, not much is known about the economic conditions under which such entities may form in equilibrium without government interventions. This paper develops a spatial equilibrium model with a competitive final sector and a monopolistically competitive intermediate sector, which allows us to determine necessary and sufficient conditions for a tech cluster to emerge as an equilibrium outcome. We show that strongly localized knowledge spillovers, skilled labor abundance, and low commuting costs are key drivers for a tech cluster to form. Not only is the productivity of the final sector higher when intermediate firms cluster, but a tech cluster hosts more intermediate firms and more R&D and production activities, and yields greater worker welfare, compared to what a dispersed pattern would generate. With continual improvements in infrastructure and communication technology that lowers coordination costs, tech clusters will eventually be fragmented.

This paper studies the e¤ects of consumer income heterogeneity on monopolistically competitive product markets and individual welfare in the context of non-homothetic preferences. When expenditure of richer individuals is less sensitive to price change compared to poorer ones, a mean-preserving contraction of income distribution makes firm revenue less sensitive to price changes. This entices firms to charge higher prices. As a result, new firms enter the market, broadening product diversity. General equilibrium effects have a negative impact on poorer individuals and, in specific circumstances, on richer individuals. Furthermore, reduced income inequality may shift the market equilibrium further away from optimal product diversity. In open economies, lower income inequality in a country creates a price divergence between countries and decreases trade volumes and values. Those general equilibrium effects are shown to be quantitatively non negligible.

Larger cities typically give rise to two opposite effects: tougher competition among firms and higher production costs. Using an urban model with substitutability of production factors and pro-competitive effects, I study the response of the market outcome to city size, land-use regulations, and commuting costs. For industries with low input shares of land, larger cities host more firms setting lower prices whereas for sectors with intermediate land shares larger cities accommodate more firms charging higher prices. Softer land-use regulations and/or lower commuting costs reinforce pro-competitive effects, making larger cities more attractive for residents via lower prices and broader product diversity.

Larger cities typically give rise to two effects working in opposite directions: tougher competition among firms and higher production costs. Using an urban model with substitutability of production factors and pro-competitive effects, we study how market outcome responds to city population size, land-use regulation and commuting costs. For industries with small input of land, larger cities host more firms which set lower prices whereas larger cities accommodate more firms which charge higher prices in industries with intermediate land share in production. Furthermore, for industries with high input share of land, larger cities allocate fewer firms with higher product prices. We show that softer land-use regulation and/or lower commuting costs reinforce pro-competitive effects making larger cities more attractive for residents via lower product prices and broader variety for a larger number of industries.

We develop a general equilibrium model of monopolistic competition with a traded and a non-traded sector. Using a broad class of homothetic preferences—that generate variable markups, display a simple behavior of their elasticity of substitution, and nest the ces as a limiting case—we show that trade liberalization: (i) reduces domestic markups and increases imported markups in the traded sector; (ii) increases markups in the non-traded sector; and (iii) increases firm sizes in both sectors. Thus, while domestic and export markups in the traded sector converge across countries, markups diverge across sectors within countries. The negative welfare effects of higher markups and less consumption diversity in the non-traded sector dampen the positive welfare effects of lower markups and greater diversity in the traded sector.

This paper discusses the impact of conformism on product quality, firm selection, and trade patterns. It shows that when consumers have a higher degree of conformism and/or their distribution of conformism becomes more concentrated, the equilibrium average demand falls while product quality rises in a closed economy. In an international trade context, this strengthens the home consumption bias when consumers conform to the behavior of local people. The home bias is mitigated under globalization where individuals tend to conform to people worldwide. The paper also discusses the conditions under which conformism and conspicuousness are reconciled.

We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firm profit and firm size may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, while both firms' size and profits are lower in this country than in the country where capital is relatively scarce. By contrast, the pricing policy adopted by firms does not depend on capital endowment and country asymmetry. It is determined by the nature of preferences: when demand elasticity increases (decreases) with consumption, firms practice dumping (reverse-dumping).