A single-good Löschian 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.
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