Human Capital Migration, Technology Spillover and Industrial Spatial Equilibria—A Model Extension of New Economic Geography in OTT Analysis Framework

Compared with DCI analysis framework of New Economic Geography, one of the most important changes of OTT analysis framework is that utility function is quasilinear quadratic function rather than constant elasticity of substitution nested Cobb-Douglas utility function. Another important change is that using linear transport cost to replace the “iceberg” transaction cost. Under OTT analysis framework, this paper introduces technology spillover into linear footloose-entrepreneur model, so that the new linear FE model developed in this paper can not only verify the conclusions of the original linear FE model, but also get some new conclusions: The increase of transportation cost, consumers' preference for different industrial products, substitutability between industrial products, local spillover effect and cross-border spillover effect will all strengthen the local market effect. There are prerequisites for the existence of market crowding, when the transportation cost is low, the consumers' preference for different industrial products is high, the substitutability between industrial products is low, the local technology spillover effect is high or the cross-border technology spillover effect is low, the market crowding effect will disappear and be reversed to a driving force for industrial agglomeration. The break point may be greater than, equal to or less than the sustain point, which means that with the change of transportation cost, the emergence of the stable interior asymmetric outcomes becomes a possibility.