Loschian spatial competition and the related labor market

A single-good Loschian model of spatial pricing is expanded to incorporate elements of the related input market. Technical change in the labor sector induces the entry of new firms. Short-run and long-run impacts of technical change on the spatial product and spatial labor markets are analyzed. The so-called 'perverse effect' of spatial competition remains intact in this expanded model under certain conditions. Moreover the labor market is likely to experience a fall in real wages as labor productivity increases.