The Dilemma of Factor Allocation and Wage Difference under the Constant Region-Wide Returns to Scale

In the model setting of multiregional macroeconomic research, constant return on scale all production functions and free flow factors cannot be combined. Otherwise, potential theoretical conflict, that is, problem contradiction equations, may arise. If there is a unified capital interest rate in market regions remains unchanged, it necessary to set restrictions labor force order realize differential wages among regions. When not too high, regional wage increases with larger output elasticity.